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G fund (TSP unicorn)

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  • G fund (TSP unicorn)

    A recent article in Morningstar that trumpets the fairly unique attributes of G-fund, available only to the federal workforce in their retirement accounts (TSP):



    My take away: G-fund is a fairly unique investment vehicle, one of the few non-commodity related investments that actually produced a gain this year and is likely to continue to do well (by which I mean "ho-hum" hold its value, not a home run) even in deflationary or stag-flation condition. With a brief look at the article & its charts, I think it's a great component of anyone's portfolio who has access to it, on par or better than I-bonds, at least until I-bonds fixed rate does not reach 1%+, at which point I would be more excited to hold I-bonds long term as a hedge against a return to inflation (& due to its benefits of deferred gains and tax-free gains for educational use provided certain fairly strong restricitons are met).

    Comments, thoughts?

    Tangentially related: I know that WCI preaches you cannot predict where the interest rates are headed and I think in general that is true, but I felt fairly strongly that I could predict this year that the rates were headed up. To that end, I moved away from intermediate-long duration bonds to short-duration bonds and now I am slowly & steadily transitioning back, in close correlation with where the inflation rates are headed and how the fed responds. Anyone else did it this year and benefited too? It's not a ton, maybe a few 1000$, but that's still better than a "kick in the teeth."


  • #2
    Federal employees who invest in the G fund tend to put a pretty large percentage of their TSP into the G fund, to their detriment compared to the C and S funds.

    Folks who try to market time and get into and out of the G fund tend to do worse.

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    • #3
      When we start favoring our taxdeferred accounts for cash/bonds in retirement - it'll all be in the G fund -- so the TSP itself may look a little more G heavy but lots of tax deferred outside of TSP too. Overall won't pass 20% entire portfolio even towards the end.

      The hard part is electing disbursements from TSP.

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      • #4
        Originally posted by Hank View Post
        Federal employees who invest in the G fund tend to put a pretty large percentage of their TSP into the G fund, to their detriment compared to the C and S funds.

        Folks who try to market time and get into and out of the G fund tend to do worse.
        Absolutely nothing to do with what I posted. But yes, long term overallocation into bonds because one is skittish about the market or trying to time the market by altering one's bond:stock allocation ratio based on "gut" is a bad decision.

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        • #5
          Thanks for posting the link. I'm glad the G fund has continued to outpace inflation because it has had periods of really anemic performance. A year or two ago, TSP's F fund (total bond) looked much more attractive but in this rising interest rate environment the G fund has really shined. As WCI has said, it is a "free lunch" since you have zero interest rate risk and won't lose money unless the US government defaults.

          Is it a unicorn? Yes, but there is a second unicorn in my stable. We have access to the G fund through my wife's work and TIAA traditional through mine. TIAA traditional has much less liquidity (must be withdrawn over no fewer than 9 years) but my contract guarantees at least 3% interest no matter what (since November new funds are being credited at 6.25%). Although TIAA may be more likely to default than Uncle Sam, it still has the highest possible credit ratings so I'm willing to live with that risk and the withdrawal restrictions in exchange for the higher rates.

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