I will show you the secrets to investing in the TSP during a recession.
You will know exactly which changes you should make to your asset allocation to keep yourself safe during a falling market and in a rising interest rate atmosphere.
Here’s the catch…
You shouldn’t do anything different than normal.
Don’t change your allocation. Don’t panic sell. Don’t listen to the naysayers.
I’ll show you exactly what you should and shouldn’t change….(read more)
LEARN MORE ABOUT: Thrift Savings Plans
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
TSP Asset Allocation During a Recession (2023)
As the global economy faces the challenges of a recession in 2023, it is important for investors to carefully evaluate their asset allocation strategies. One such strategy is the Thrift Savings Plan (TSP) asset allocation, which is specifically designed for federal government employees and members of the military. In times of economic uncertainty, understanding how to allocate your TSP assets can help safeguard your investments and potentially mitigate losses.
During a recession, it is essential to adopt a conservative approach to asset allocation. This means reducing exposure to risky investments and focusing on preserving capital. While it may be tempting to make bold moves in an attempt to make quick gains, the volatility and uncertainty associated with a recession make it a risky proposition.
A key element of TSP asset allocation during a recession is diversification. It is crucial to spread your investments across different asset classes such as stocks, bonds, and cash equivalents. This diversification helps reduce risk by not having all your eggs in one basket. For example, if stocks perform poorly during a recession, bonds or cash equivalents may provide stability to your portfolio.
Given the uncertainty surrounding the market, it is advisable to rebalance your TSP portfolio periodically. Rebalancing involves adjusting the allocation of your investments to restore it to its original target mix. This process helps you stay on track with your investment goals and take advantage of market opportunities. For example, if stocks have performed well during a specific period, you may need to sell some stocks to bring the allocation back to the desired level and invest in other asset classes.
It is important to note that TSP offers various funds for investment, each catering to different risk tolerance levels. The most conservative option is the G Fund, which invests in government securities and aims to preserve capital. For slightly higher returns, you may consider the F Fund that primarily invests in bond index funds. The C Fund, on the other hand, focuses on large-cap stocks, while the S Fund targets small and mid-cap stocks. Lastly, the I Fund gives exposure to international stocks.
During a recession, when market conditions are unpredictable, it is wise to allocate a larger portion of your TSP investments to safer options like the G or F Fund. These funds generally perform relatively well during economic slowdowns due to their conservative nature. However, this doesn’t mean you should completely abandon riskier options. Allocating a small portion to the C, S, or I Fund can provide potential for growth when the market stabilizes.
Additionally, diversification within each fund can be beneficial. For example, the F Fund consists of a broad range of bonds. TSP investors can further diversify by investing in different types of bonds, such as government, corporate, or municipal bonds. This diversification can help mitigate the risks associated with a particular sector or issuer.
While TSP asset allocation is an important consideration during a recession, it is equally crucial to consult with a financial advisor or do thorough research before making any investment decisions. The recessionary environment brings unique challenges and uncertainties, making professional guidance invaluable.
In conclusion, TSP asset allocation during a recession in 2023 should prioritize capital preservation through diversification and periodic rebalancing. By allocating a larger portion of investments to safer options such as the G or F Fund and diversifying within each fund, investors can potentially safeguard their portfolios and position themselves for future growth. As always, seek advice from experts to make informed decisions in these volatile times.
Very entertaining and worth the watch. Do you have a mix of Roth versus Traditional? Also, please look into your crystal ball and let us know the year TSP will start allowing targeted withdrawals versus a flat percentage across the board.
Hey Rich, will you touch on the new TSP expense ratios? Is there anything that can be done to reverse the increase in the expense ratios to become more competitive with industry? As it stands, TSP expense ratios are upwards of THREE TIMES higher than most private sector options. TSP used to be the low cost leader, but nowadays you would be better served at literally any single one of the main brokers (some are offering zero expense ratio index funds tracking the same indices as TSP). How is this incentivizing people to stay in the TSP and not transfer out to an IRA? How does TSP not recognize this or do they simply not care because employees are forced to use it?
I followed your advice to not change my allocations when the market is down. Thank you!
I have had your strategy for the last 15 years.
Great video man . Thanks for making it for everybody!
Hi, I understand what you are saying BUTTTTT! Has anyone ever asked you about TSPCALC?? The first 2 years that I have been in it I did amazing 28% and 34%. The last two years not so good but to be honest I did not follow the plan that I have picked. The plan that I picked last year was Up but I freaked out and just lost overall. Anyway your opinion will be summarily disregarded if you say anything bad about it! 🙂 No- all Cons and pros will be greatly appreciated.
I would go with the G fund, right? Rather than the F fund in today's market for my bond allocation? F fund lost 12% last year?
It's easy to time the market. When the fed raises interest rates you get out of the market. When the fed starts to lower interest rates, that means they broke something and you stay out of the market. After all that, when the stock market moves above the 200 day moving average you get back into the market. Also, get out of the F fund before the fed raises interest rates and get back in the F when they start to lower interest rates.
I'm retired…..in this environment with the f fund basically mirroring the stock funds, would the G fund be better than the F for minimizing risk?
Save you some time…C and S, 50 50. Thats it.
Great video! What are your thoughts on the different expense ratios between the C and S fund? How much can the difference between the C fund at .059 and the S fund at .090 impact your portfolio over time?
What if I have a bunch of money in the g fund that I want to move to the C fund? Should I move it over at once or over time? Thanks for your advice.
Thanks for sharing. I could use all the advice I could get! Unfortunately I haven't been contributing as much as I should have since 2013 when I began contributions to the TSP, with even a few years I wasn't contributing at all, and it was all going in the G fund. I'm just learning about investing within the last year or so and trying to get serious about it. I'm 38 and only have 20k in the TSP. So I feel like I really gotta pick it up if I want to get ahead, if I'm still able to.
Is there really any reason to hold bonds given we have a fers pension?
Great video. When 2020 hit and I thought of stocks and bonds with sticking with a portfolio it really helped. I like your 120 strategy. I believe I'm 65 c, 25 s, 5 I, 5 g
Great video. Thanks for making it. I get what you're saying for future contributions (by fund) but what are your thoughts on money in my current balance? Should it mirror future contributions?
I watch your videos!