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In the TSP, is G fund the place to be?
Monday - 5/10/2010, 8:00pm EDT
Federal News Radio
The stock market rallied on Monday after plunging last week amid fears that Greece's debt problems would affect the world economy.
Federal News Radio last Monday took a look at how the various funds in the Thrift Savings Plan did during the month of April, and overall the news was fairly positive.
Many are wondering now whether the forecast for May is as rosy, and if they should move money out of the C, S and I funds into the safer, all-bond G fund.
Where, exactly, are people putting their money in the TSP?
Tom Trabucco is the Director of External Affairs for the Federal Retirement Thrift Investments Board and said there is currently a total of $119 billion in the TSP's G fund right now, which makes it the most popular of all the funds.
"That's not surprising, I think, given the events of the last year and a half [during] which a lot of people lost a fair amount of money and decided they weren't going to stick it out -- they were going to seek the safety of the G fund."
Last month, participants moved $1.3 billion out of the G fund, however.
Trabucco said, while this might seem like a lot of money to most people, comparatively speaking, it's relatively small when one thinks about the total amount invested in that one fund.
In 2008, there were limits placed on the number of interfund transfers a participant could make in a month. Trabucco said that, while some voice concern initially, he hasn't seen any evidence that this rule has impacted overall dollar amounts.
"The number of frequent traders that we had topped out at about 4,000. These were people who were making interfund transfers every day -- so they were making 20 IFTs a month. It added up, but there was never a large number of people who were doing these trades. Some of them were trading large amounts of money, however, and when you had them all moving in one direction, which they were kind of doing because they were comparing notes . . . It was having an effect, and it was costing all other participants a fair amount of money."
Thus, the restriction that now stands, which allows two unrestricted IFTs per month, and any number of transfers back into the G fund.
Although the G fund still has the most money, the L funds are becoming increasingly popular. In 2005, 6 percent of the TSP's funds were invested in the L funds; now, that number has risen to 16 percent.
"It has been a slow and steady growth, and we're very pleased with that. The proper way to use the L funds is to put 100 percent of your funds in one L fund. There are about five percent of participants who are doing that, but there are a number of other participants who understandably are dipping their toes in the L funds. They're putting a bit in. They want to see how they perform before they go whole-hog, if you will. . . . We're happy to see people sampling the L funds. I think that, over time, as they continue to grow, more and more will become comfortable with that approach."
Read more about your TSP:
The Federal Drive: TSP: 'Please hold on to the bar'
Federal News Radio: TSP Snapshot - April up, clouds over I fund
TSP: April 2010 Performance Review - G, F, C, S, I and L funds