Are you investing your TSP nest egg or just parking it?


Most of us with money in a 401k, IRA, or other form of retirement account consider ourselves investors. In the quiet of our houses or apartments, we sometimes feel like time players. Kings of Wall Street. That kind of thing!

But is it possible that we’re more like relatively wealthy parking lot attendants rather than big gamblers, some with seven-figure nest egg? Parker, no investors?

The financial planner Arthur Stein believes that millions of active and retired Feds – anyone with money in G-funds or F-funds for government bonds – are not investors in the strict sense of the word. They kind of put (or park) their money in funds that don’t move like the stock market.

However, the people in the C-Fund, S-Fund and I-Fund invest in stocks (large, small cap and an international stock index). And while the C-Fund, S-Fund, and I-Fund go up and down – sometimes on a grand scale – they have outperformed Treasury and Bond funds in the long run. With a lot.

Not that there is anything wrong with that!

Or is there?

So what’s the difference between a real investor and a Parker? We’re going to find out today. Art Stein will be my guest on our Your Turn Show at 10am EDT. You can hear anywhere in the world or at 3:00 PM in the Washington-Baltimore area. Or catch it later when it is archived on our homepage. The bottom line is that you are listening to whether you are an investor, a parker, or maybe both. And the pros and cons (both in terms of return on investment and the certainty of being one or the other). Or a combination of both.

If you have any questions for him, please email them to [email protected] before the show.

In the meantime, he explains what an investment is and what is not:

The TSP is not an investment!

The TSP is not an investment. The 15 funds available to TSP participants are not investments. The TSP funds are one way of owning investments.

The only “investments” available in the TSP are stocks and bonds. Stocks and bonds are investments because they go up or down in value, generate income, or do both. Choosing TSP funds means investing in stocks or bonds or both.

TSP participants also determine their allocation between different types of stocks and bonds by choosing from the 15 funds available.

Asset Allocation is the percentage you invest in different types of stocks and bonds by choosing between the different TSP funds. Your asset allocation between stocks and bonds is important for many reasons, including:

  • The US equity funds (C and S) outperformed bond funds for the past 1, 5, 10, and 15 years. The US equity fund outperformed significantly.
  • All three equity funds are much more volatile (larger fluctuations in value) than the bond funds. And the G-Fund never fluctuates in value (zero volatility).
  • All funds (except G) involve the risk of loss of capital and income. The G-Fund is guaranteed by the US government, which means there should never be any losses.
  • Past performance is no guarantee of future performance.

The asset allocation should be based on your financial and personal situation. For example:

  • What is the rate of return that you need to hold an asset on retirement with withdrawals.
  • Risk Tolerance – Emotional ability to ignore market fluctuations and losses in order to generate long-term profits.
  • Risk perception. Do you think the stock and / or bond markets could fall and never recover?
  • Whether short, medium or long term investments are required. Or all three? Stocks suffer more from volatility and price declines, but are more likely to increase purchasing power over long periods of time.

Asset allocation is a difficult decision, but a critical factor in future returns.

Almost useless factoid

By Jonathan Tercasio

On the night of May 14, 1998 – when the series finale of “Seinfeld” aired – Frank Sinatra died at Cedar-Sinai Medical Center in Los Angeles. As the story goes, there were so many people in there to watch the finale that traffic in LA was light and the ambulance carrying Sinatra could get to the hospital quickly.

Source: IMDb


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