Do you use your own formula for funds or do you lean towards L funds?

[john812mom]

Hi, I’m 25 years old, I joined back in June 2021 when I was 24. I’m currently putting 8% into my TSP and 12% into my Roth IRA. (Total 20% of my pay)
My current blend is
C: 35%
S: 28%
I: 17%
F: 3%
G: 2%
L 2050: 5%
L 2055: 10%

I basically leaned towards the most high risk/high reward funds and then maybe in my final 3-5 years I’ll start to be more conservative but I just wanted to know if you guys think this is a good investment strategy? I thought by diversifying and putting 20% from the start would be a good idea. This is my first time having a real job and I’m still learning a lot but I also want to be financially secure and have a safe amount in before I complete my 20 years.

 

[mm1992]

@john812mom The L funds are really take it or leave it. Either you agree with what they're doing and it doesn't make sense to add in your own suboptimal choices, or you disagree with what they're doing and it doesn't make sense to include their suboptimal choices.

 

[peter_aka_00avenger00]

@mm1992 L fund is a scam because it has G fund in it. I rest my case.

 

[winter_rose]

@peter_aka_00avenger00 Somebody doesn't understand life cycle investing lol

 

[peter_aka_00avenger00]

@winter_rose I understand that I will die richer than L fund people and my unemployed descendants will live longer and die richer than L fund people.

 

[winter_rose]

@peter_aka_00avenger00 Until you get hit with a huge crash near retirement and lose 30% of your gains.

 

[peter_aka_00avenger00]

@winter_rose I can definitely handle a 30% dip. I probably won’t even have to touch my TSP because I have a margin account that I can keep taking loans out against my unrealized gains. And I’ll keep refilling my margin account with social security and the federal pension.

 

[peter_aka_00avenger00]

@winter_rose The F fund is also a scam because they call it Fixed Income but it has terrible market risk and early repayment risk. Interest rates are expected to drop this year, so expect F FUND and BND to drop.

The lifecycle funds just get worse as you age. I already know you can’t show me a chart where an L fund retiree did better than a C fund retiree. Pick any year.

 

[winter_rose]

@peter_aka_00avenger00 The f fund is not necessarily a scam, you are buying a total bond market fund. Yes the G fund is better as a short-term fixed interest instrument without any credit risk but that same credit risk can swing to the upside as well.

an L fund retiree did better than a C fund retiree

You do realize, the priorities of a retiree are far different from somebody in the accumulation phase? Literally any period with extreme market turbulence and massive drops will be disastrous for a retiree 100% in the C fund. I literally just need to pick any of the dozen or so 50% market drops in the last couple decades to show you where a retiree would be better off not being 100% equities.

 

[peter_aka_00avenger00]

@winter_rose Like I said, show me a chart.

 

[winter_rose]

@peter_aka_00avenger00 https://investingforaliving.us/2010/11/18/the-worst-times-to-retire-in-history/#:~:text=The%20worst%20times%20to%20retiree%20for%20the%20majority,which%20destroyed%20the%20purchasing%20power%20of%20their%20portfolios.

Any of these periods would have left a brand new retiree in a really bad position had they been 100% stocks. Retirees simply don't have the option to ride out the market and selling at a loss because they are making withdrawals from their portfolio to cover living expenses.

 

[peter_aka_00avenger00]

@winter_rose I mean, you’re completely ignoring the fact that retirees have margin accounts and social security and maybe even a pension on top of the retirement account(s). All of those cash inflows, some of which you control and some you can’t, can be deposited into your margin account, reinvested, and then you can take a loan against the margin account positions so that you buy time until your positions fully recover. The interest is 100% tax deductible. And since everything in your retirement account that’s been there at least 10 years is doubled and everything from 20 years ago is quadrupled and everything from 30 years ago is octupled, you don’t have to worry about selling at a loss when the market is down 50% because you’re still up 300%. The pensions and social security allow you to dollar cost average during your entire retirement.

 

[winter_rose]

@peter_aka_00avenger00

I mean, you’re completely ignoring the fact that retirees have margin accounts and social security and maybe even a pension on top of the retirement account(s).

Not at all, this is all accounted for. Your proposal requires a retiree to massively adjust their lifestyle in response to market while risking their legacy and future income. I am not against the intelligent use of leverage in retirement but your proposal is not that. If this was even remotely a good idea, plenty of retirement specialists would be recommending it but they do not.

 

[peter_aka_00avenger00]

@winter_rose So-called financial advisors suggest mostly bad ideas, such as annuities, lifecycle funds, etc.

Their so-called profession has made it so they’re only allowed to sell annuities. The best actual advice is simple and cheap/free. They stay in business by claiming to outperform VOO and qqq but they use sneaky language to avoid completely lying.

 

[hungarus]

@john812mom I'm assuming you mean you're putting 20% into your TSP, split 8% traditional and 12% Roth, not that you're putting 12% into a Roth IRA? Your TSP is not an IRA.

As for funds I'm doing 50/30/20, C/S/I. If you're looking at long term growth I don't really see a reason to put anything in G/F.

I don't really see the need to mix L funds with individual funds. If you have a higher higher risk tolerance I would either put everything in L2065 (which is 99% C/S/I) or do a blend of the individual funds.

 

[naomi]

@john812mom On the civilian side I am a Certified Financial Planner and CPA and I have my TSP all Roth and 40/40/20 C/S/I.

 

[winter_rose]

@naomi Interesting, no bond allocation?

 

[peter_aka_00avenger00]

@winter_rose It’s not actual bonds, it’s the bond market. Bonds with their stated rate can be sold. If better rates are available then you need to discount it. The F fund or BND etf discounts your shares all the time. Regular people don’t usually buy real bonds. They buy iBonds from treasurydirect’s website or CD from their bank. The whole 60/40 stock/bond strategy was never something that resulted in superior results. What actually works is using margin loan regardless of whether it’s up or down, that way you’re always owning and earning dividends.

 

[winter_rose]

@peter_aka_00avenger00 Right, let's pull out margin and pay 12% interest to go long on dividend stocks... What could go wrong lol

Also you have no idea what you're talking about. Bond index funds have been a thing for a very long time and the classic 60/40 portfolio was frequently used with mutual funds delivering exactly the returns we would expect of a 60/40 portfolio.

 

[peter_aka_00avenger00]

@winter_rose How much margin at 12%?