TSP Reallocation Plan

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Feijao
Posts: 8
Joined: Sun May 05, 2019 4:19 pm

TSP Reallocation Plan

Post by Feijao »

Please let me know if what I am doing makes sense. I am a federal government employee. I have well over a million dollars in the TSP. My allocation is: 25% G; 50% C; 15% S; 10% I. This is the allocation I am comfortable with and plan on continuing this into retirement.

With the TSP, if I submit a reallocation request before noon EST the reallocation occurs at close of that day’s market. For example, this Monday April 5 was a very strong day for equities, I reallocated back to my baseline above which pushed a significant amount of money into my G fund. I do this to secure earnings to the G fund. I have done this quite a few times and it seems to be an easy way to lock in market gains. With the TSP, one can reallocate funds twice a month. Does this reallocation plan make sense, or should I stop doing this immediately?
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retired@50
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Location: Living in the U.S.A.

Re: TSP Reallocation Plan

Post by retired@50 »

Feijao wrote: Tue Apr 06, 2021 9:01 am Please let me know if what I am doing makes sense. I am a federal government employee. I have well over a million dollars in the TSP. My allocation is: 25% G; 50% C; 15% S; 10% I. This is the allocation I am comfortable with and plan on continuing this into retirement.

With the TSP, if I submit a reallocation request before noon EST the reallocation occurs at close of that day’s market. For example, this Monday April 5 was a very strong day for equities, I reallocated back to my baseline above which pushed a significant amount of money into my G fund. I do this to secure earnings to the G fund. I have done this quite a few times and it seems to be an easy way to lock in market gains. With the TSP, one can reallocate funds twice a month. Does this reallocation plan make sense, or should I stop doing this immediately?
If you are comfortable with the percentages shown above, then stick with it. It seems to make sense.

It may be a terminology technicality, but what you describe sounds like re-balancing (not reallocating) to me. In other words, you're re-balancing your portfolio back to your intended asset allocation.

For more details on re-balancing, see the wiki page linked below.
https://www.bogleheads.org/wiki/Rebalancing

Regards,
This is one person's opinion. Nothing more.
rich126
Posts: 2521
Joined: Thu Mar 01, 2018 4:56 pm

Re: TSP Reallocation Plan

Post by rich126 »

retired@50 wrote: Tue Apr 06, 2021 10:10 am
Feijao wrote: Tue Apr 06, 2021 9:01 am Please let me know if what I am doing makes sense. I am a federal government employee. I have well over a million dollars in the TSP. My allocation is: 25% G; 50% C; 15% S; 10% I. This is the allocation I am comfortable with and plan on continuing this into retirement.

With the TSP, if I submit a reallocation request before noon EST the reallocation occurs at close of that day’s market. For example, this Monday April 5 was a very strong day for equities, I reallocated back to my baseline above which pushed a significant amount of money into my G fund. I do this to secure earnings to the G fund. I have done this quite a few times and it seems to be an easy way to lock in market gains. With the TSP, one can reallocate funds twice a month. Does this reallocation plan make sense, or should I stop doing this immediately?
If you are comfortable with the percentages shown above, then stick with it. It seems to make sense.

It may be a terminology technicality, but what you describe sounds like re-balancing (not reallocating) to me. In other words, you're re-balancing your portfolio back to your intended asset allocation.

For more details on re-balancing, see the wiki page linked below.
https://www.bogleheads.org/wiki/Rebalancing

Regards,
The TSP uses its own terminology.

And at first glance for some it can get confusing because you have 2 things:
1. How your current money from each paycheck gets allocated to the various funds (TSP calls this contribution allocation).
2. If you want to re-allocate or re-distribute (or re-balance) money among existing investments TSP call it an "interfund transfer"

So you could have 50% in the common stock fund and 50% in the international fund with your existing TSP money but have money from each paycheck go 25% G, 25%F, 25% I, 25% S.

I don't recall seeing balancing anywhere on the TSP website.
https://www.tsp.gov/how-to-invest/chang ... vestments/

Personally I find the "interfund transfer" term strange since to me it indicates transferring money from a single place to a different single place but it actually gives you a list of the funds and what % you want in each fund and shows you your current percentages.
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retired@50
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Re: TSP Reallocation Plan

Post by retired@50 »

rich126 wrote: Tue Apr 06, 2021 10:55 am The TSP uses its own terminology.
Naturally... why would the Federal government ever try to conform to convention. :wink:

Regards,
This is one person's opinion. Nothing more.
Fat Tails
Posts: 132
Joined: Wed Oct 30, 2019 12:47 am

Re: TSP Reallocation Plan

Post by Fat Tails »

I would imagine that very frequent rebalancing would hurt long term returns as compared to annual rebalancing. You are selling winners too soon. Trying to capitalize on the random walk over the long-term, especially with TSPs constraints on interfund transfers, seems impossible to me.

Here is some information on rebalancing. https://www.hodlbot.io/blog/does-portfo ... ve-returns

Good luck.
“It's tough to make predictions, especially about the future.” ― Yogi Berra
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