Thrift Savings Plans Investing Strategies
There are multiple different investing strategies when it comes to TSP. Millions of possible allocation set-ups for each of the funds. This section is going to cover a basic overview of ways to invest within TSP. I won’t be providing “example portfolios” but only high level recommendations so you can choose what works best for you based on time, interest, and the level of management you want to perform.
I break these down into Beginner, Intermediate, and Advanced.
Beginner
The beginner strategy is the easiest and requires little to no work on your end as the investor. The beginner strategy is simple: Use the target date Lifecycle funds for your retirement. This is great if you want no part in managing your TSP account other than funding your account. You can still choose Roth, Traditional, or a combination and the percentage of your pay you allocate to TSP.
I highly recommend you allocate the minimum percentage required to earn 100% of your employers TSP match.
Essentially this makes your “initial return” on those funds double or 100% which is HUGE. Using this strategy allows TSP to move your funds around where they see fit based on when you want to retire. You fund the account and TSP does the rest.
Intermediate
The intermediate strategy requires you to do some research. The amount of research depends on how often and in-depth you want to make your investment allocation. In this strategy you set up your own custom allocation for each of the individual funds including the L Fund if you want. You could have the 60/40 stock to bond split mentioned above. You could have 50% Lifecycle Fund / 25% C / 15% S / and 10% I. The combinations are unlimited. I will say, when choosing an allocation, remember that each investment should serve a purpose in your portfolio. This strategy will have the best chance of success with research and that understanding. You could choose a simple allocation, set it up, and leave it like than for as long as you want.
Advanced
WARNING
This is an advanced investment strategy that has been shown to produce highly volatile returns. Some individuals have shown high success while other have lost $1000’s. Past stock market performance does not translate to future performance. Use at your own risk!
The last strategy is known as Seasonal Trading with TSP. This is the ultimate 100% hands on approach. The strategy is not endorsed by TSP but has a huge cult following amongst TSP investors. Use this strategy at your own risk. I’ve seen investors post amazing returns and seen some perform worse than desirable. There is an entire website and facebook group dedicated to it. If you choose to do this, expect to do a lot of research. I used this strategy for a while but found that it took to much time and I didn’t have internet 24/7, which is required to keep up with the trading requirements. In a nutshell, TSP Calc researches and analyzes historical trends in the performance of TSP Individual Funds to try and pin point the ideal time your money should be in a certain fund each month to maximize returns.
A How-to Video can be found here.
How to Basics:
TSP allows you to transfer money to different funds through Interfund Transfers (IFTs) twice a month (three if you transfer back to G Fund). These investors use the TSP Calculator to build transfer schedules based around this premise. The goal is to be in the right fund at the right time. Again, this strategy has a steep learning curve and requires a lot of hands on work on your part. Below is an example transfer schedule. Ensure you have a firm grasp on finances and Seasonal Trading before you jump in feet first.
In the final section we’ll look at a review Thrift Savings Plan contacts.