New era for TSP "I" Fund?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Darwin
Posts: 45
Joined: Sat Feb 25, 2017 12:44 am
Location: California

New era for TSP "I" Fund?

Post by Darwin » Tue Sep 11, 2018 11:15 pm

As of January 1st the TSP "I" Fund will be very different from what it has been before... Specifically, more comprehensively International (I).
Given the very low fees that go along with the TSP, (and the soon-to-be reasonable TSP International plan), it makes me rethink placing my allotment of International in my not-quite-as-cheap (Vanguard) Roth and taxable. I'm thinking about keeping the (extremely opposite) G and I funds as the "safe bond" vs "equity growth" funds in TSP for now. Eventually, over the years, I assume the G will push the I towards the (Vanguard) Roth again as equities inevitably gain momentum in my overall AA.
Any thoughts? I love differing views, they save me stupid mistakes...

motorcyclesarecool
Posts: 547
Joined: Sun Dec 14, 2014 7:39 am

Re: New era for TSP "I" Fund?

Post by motorcyclesarecool » Wed Sep 12, 2018 5:04 am

Here’s what I wrote in another thread:
You might want to continue investing your international allocation outside the TSP at Fidelity.
motorcyclesarecool wrote:
Sun Aug 05, 2018 10:24 am

As noted in a monstrous thread, Fidelity has just started offering a Total US Stock Market fund and a Total International Stock Market find, both with an expense ratio of 0%, and both with a minimum investment of $0. Fidelity makes its money on the funds by loaning securities to short sellers. I imagine they also hope to upsell their customers later on.

According to this page:
https://www.fidelity.com/mutual-funds/i ... ndex-funds
Fidelity has the TSP’s expense ratio of 0.033% beat across the board. With the notable exception of the G-fund, (I don’t care about the L-funds) I have zero reason to remain with the TSP after separation from service.

FZROX 0.0% < 80%C & 20%S 0.033%
FZILX 0.0% < I 0.033%

FUSVX 0.015% < C 0.033%
FSITX 0.025% < F 0.033%
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

nps
Posts: 588
Joined: Thu Dec 04, 2014 10:18 am

Re: New era for TSP "I" Fund?

Post by nps » Wed Sep 12, 2018 5:22 am

Darwin wrote:
Tue Sep 11, 2018 11:15 pm
As of January 1st the TSP "I" Fund will be very different from what it has been before... Specifically, more comprehensively International (I).
Do you have a source for that date? I have not yet seen a specific calendar day cited for the planned index change.

rkhusky
Posts: 5706
Joined: Thu Aug 18, 2011 8:09 pm

Re: New era for TSP "I" Fund?

Post by rkhusky » Wed Sep 12, 2018 6:38 am

nps wrote:
Wed Sep 12, 2018 5:22 am
Darwin wrote:
Tue Sep 11, 2018 11:15 pm
As of January 1st the TSP "I" Fund will be very different from what it has been before... Specifically, more comprehensively International (I).
Do you have a source for that date? I have not yet seen a specific calendar day cited for the planned index change.
+1 The news stories I've seen all indicate that it will happen some time in 2019. And my guess is that it will slowly transition over a number of months.

Darwin
Posts: 45
Joined: Sat Feb 25, 2017 12:44 am
Location: California

Re: New era for TSP "I" Fund?

Post by Darwin » Wed Sep 12, 2018 7:23 am

rkhusky wrote:
Wed Sep 12, 2018 6:38 am
nps wrote:
Wed Sep 12, 2018 5:22 am
Darwin wrote:
Tue Sep 11, 2018 11:15 pm
As of January 1st the TSP "I" Fund will be very different from what it has been before... Specifically, more comprehensively International (I).
Do you have a source for that date? I have not yet seen a specific calendar day cited for the planned index change.
+1 The news stories I've seen all indicate that it will happen some time in 2019. And my guess is that it will slowly transition over a number of months.
The newsletter I read recenty just indicated" "after January 1st", though that could mean a gradual shift. Would make sense to make that large of a change over time.

stan1
Posts: 5989
Joined: Mon Oct 08, 2007 4:35 pm

Re: New era for TSP "I" Fund?

Post by stan1 » Wed Sep 12, 2018 7:31 am

They are recompeting the I Fund management contract with the MSCI All World (ex US) index so that contract will need to award first and then there will be a transition period since there is $47 billion dollars under management in the I Fund. Once the contract is awarded I think there will be a better estimate of when in 2019 it will happen.

User avatar
jadd806
Posts: 264
Joined: Mon Aug 17, 2015 4:34 pm
Location: New England

Re: New era for TSP "I" Fund?

Post by jadd806 » Wed Sep 12, 2018 8:00 am

Darwin wrote:
Tue Sep 11, 2018 11:15 pm
it makes me rethink placing my allotment of International in my not-quite-as-cheap (Vanguard) Roth and taxable.
To answer your question rather than debate the particulars of the I Fund change:

If you can do this without creating a taxable event, go ahead. If the bulk of your international is in your taxable account you're going to have some difficulty.

It only saves you about 7 basis points to hold the I Fund compared to Vanguard Total International Admiral Fund, or $70 per $100k invested in international stocks. So I wouldn't go too crazy about it and I definitely wouldn't incur any taxes to make the change.

Darwin
Posts: 45
Joined: Sat Feb 25, 2017 12:44 am
Location: California

Re: New era for TSP "I" Fund?

Post by Darwin » Wed Sep 12, 2018 10:12 pm

jadd806 wrote:
Wed Sep 12, 2018 8:00 am
Darwin wrote:
Tue Sep 11, 2018 11:15 pm
it makes me rethink placing my allotment of International in my not-quite-as-cheap (Vanguard) Roth and taxable.
To answer your question rather than debate the particulars of the I Fund change:

If you can do this without creating a taxable event, go ahead. If the bulk of your international is in your taxable account you're going to have some difficulty.

It only saves you about 7 basis points to hold the I Fund compared to Vanguard Total International Admiral Fund, or $70 per $100k invested in international stocks. So I wouldn't go too crazy about it and I definitely wouldn't incur any taxes to make the change.
Absolutely. Luckily, there's no tax hit. TSP is (by definition) in 401k, and my Vanguard International is in a Roth along with Total Stock.

Darwin
Posts: 45
Joined: Sat Feb 25, 2017 12:44 am
Location: California

Re: New era for TSP "I" Fund?

Post by Darwin » Wed Sep 12, 2018 10:17 pm

stan1 wrote:
Wed Sep 12, 2018 7:31 am
They are recompeting the I Fund management contract with the MSCI All World (ex US) index so that contract will need to award first and then there will be a transition period since there is $47 billion dollars under management in the I Fund. Once the contract is awarded I think there will be a better estimate of when in 2019 it will happen.
Thanks for the tip, I'll monitor that until they actually change the system. Right now the number of world economies represented is rather limited, so I've avoided it.

Crisium
Posts: 151
Joined: Thu Dec 22, 2016 9:52 am

Re: New era for TSP "I" Fund?

Post by Crisium » Thu Sep 13, 2018 9:45 am

Keep in mind this index does not cover any small-caps.

MnD
Posts: 3788
Joined: Mon Jan 14, 2008 12:41 pm

Re: New era for TSP "I" Fund?

Post by MnD » Thu Sep 13, 2018 11:20 pm

Crisium wrote:
Thu Sep 13, 2018 9:45 am
Keep in mind this index does not cover any small-caps.
The new I fund index (hence the thread title) will certainly cover small caps.
https://www.msci.com/documents/10199/f2 ... 7dcc44536c
The MSCI ACWI ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed
Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries. With 6,462 constituents, the index covers
approximately 99% of the global equity opportunity set outside the US.
Decision here page 4 bottom. https://www.frtib.gov/MeetingMinutes/2017/2017Nov.pdf

Crisium
Posts: 151
Joined: Thu Dec 22, 2016 9:52 am

Re: New era for TSP "I" Fund?

Post by Crisium » Fri Sep 14, 2018 7:36 am

Oh that's good to hear.

I thought it was this, which is what my 401k international benchmarks:
https://www.msci.com/documents/10199/86 ... 29ed5adbbf

I still have a pittance in my TSP so I'm looking forward to the change from EAFE.

texasdiver
Posts: 2719
Joined: Thu Jun 25, 2009 12:50 am
Location: Vancouver WA

Re: New era for TSP "I" Fund?

Post by texasdiver » Fri Sep 14, 2018 3:49 pm

So has anyone done a back-cast to compare the performance difference between these two different benchmarks over the past 10-20 years?

WanderingDoc
Posts: 1133
Joined: Sat Aug 05, 2017 8:21 pm

Re: New era for TSP "I" Fund?

Post by WanderingDoc » Fri Sep 14, 2018 4:32 pm

MnD wrote:
Thu Sep 13, 2018 11:20 pm
Crisium wrote:
Thu Sep 13, 2018 9:45 am
Keep in mind this index does not cover any small-caps.
The new I fund index (hence the thread title) will certainly cover small caps.
https://www.msci.com/documents/10199/f2 ... 7dcc44536c
The MSCI ACWI ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed
Markets (DM) countries (excluding the United States) and 24 Emerging Markets (EM) countries. With 6,462 constituents, the index covers
approximately 99% of the global equity opportunity set outside the US.
Decision here page 4 bottom. https://www.frtib.gov/MeetingMinutes/2017/2017Nov.pdf
Great to hear! With about $8K per year is going into the I fund, about time its going to be a useful fund :)
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

Jeff Albertson
Posts: 566
Joined: Sat Apr 06, 2013 7:11 pm
Location: Springfield

Re: New era for TSP "I" Fund?

Post by Jeff Albertson » Tue Sep 18, 2018 8:53 pm

FWIW,
The Thrift Savings Plan acted on Monday to have its automatic pilot investment funds steer a more aggressive course.
Following a consultant’s recommendation, the TSP will shift the investment mixes in its “lifecycle” funds, what it calls L Funds, more toward stocks. The goal is to “improve outcomes for existing L Fund participants while not unreasonably increasing risk levels,” according to a summary that the TSP staff presented to the program’s governing board.
...
However, effective immediately, the percentages of stocks in the 2030, 2040 and 2050 funds will be frozen at their current levels. That will continue for a number of years until those percentages match the levels they would have reached had they started with a more aggressive profile of about a tenth more in stocks.
https://www.washingtonpost.com/politics ... rd-stocks/

ishkadetto
Posts: 34
Joined: Thu May 24, 2018 2:49 pm
Location: California, USA

Re: New era for TSP "I" Fund?

Post by ishkadetto » Tue Sep 18, 2018 10:58 pm

https://www.washingtonpost.com/politics ... rd-stocks/

Another interesting takeaway from that article is: "effective in January the TSP will increase from 30 to 35 percent the portion of each fund’s stock portfolio that is invested in the international stock fund."

This moves them closer to Vanguard's 40% international allocation for Target date funds.

rkhusky
Posts: 5706
Joined: Thu Aug 18, 2011 8:09 pm

Re: New era for TSP "I" Fund?

Post by rkhusky » Wed Sep 19, 2018 6:35 am

The L Funds are ultra conservative and reach their terminal allocation of 20/80 on the target year. This compares to Vanguard's TR funds reaching 50/50 on the target year and their terminal allocation of 30/70 7 years after that.

Here is the announcement from the TSP web site:
Changes coming to the Lifecycle (L) Funds — (September 18, 2018) The TSP is planning adjustments to the L Funds in an effort to improve outcomes for participants who invest in them. Effective in January 2019, we will increase exposure to international stocks (the I Fund) from 30% to 35% in all L Funds. The L Income Fund stock allocation (C, S, and I Funds combined) will increase from 20% to 30% over a period of up to 10 years. The total stock allocation for the L 2030, L 2040, and L 2050 Funds will hold steady for a period of years to facilitate transition to the L 2060 Fund when it is introduced in 2020. Finally, at that time, the L 2060 Fund will begin with a 99% stock allocation.

Post Reply