How am I doing? (23 y/o, O-1)

[liahna]

@cbc8171 Not poor advice, I go for max long term growth. If you want to squirrel away some of your money in govt securities, and govt corporate mortgage backed bond funds (G/F funds for everybody else), enjoy. Your “go back one decade further” included the 2007 housing market crash and those who didn’t panic and move their allocations to G have been enjoying the double digit growth up since (give or take a year). It’s a long term game.

For the poster, the C fund is invested in a stock index fund that fully replicates the Standard and Poor's 500 (S&P 500) Index, a broad market index made up of the stocks of 500 large to medium-sized U.S. companies. The S Fund's investment objective is to match the performance of the Dow Jones U.S. Completion Total Stock Market Index.

I fund? I may adjust and throw some in the future but with 25% of the fund based on Japans economy with their working population in decline..and another 17% invested in the UK economy?...Emerging markets and Canada are not included which I consider a fail compared to more broad International Index funds.

Even the “highest growth” Lifecycle fund L2050, has 25% I fund, 12% G fund, 6% F fund. Not counting the I fund, that’s 18% wasted in historically lower risk lower earning funds. As he gets older he could move some to F/G if he wants less risk.

Bottom line..I always encourage people to get smart and learn more about the funds then then do a lazy mans choice of Lifecycle funds or even listen to strangers. If he’s starting to significantly invest in TSP, it’s worth the effort to start learning his risk/reward tolerance.

 

[cbc8171]

@liahna

Your “go back one decade further” included the 2007 housing market crash

You say this as if market crashes are an anomaly.

those who didn’t panic and move their allocations to G have been enjoying the double digit growth up since

Right, that's nice, but this part about the double digit growth following doesn't always happen. Focusing onthe 2009-2019 timeframe is pointless and really pretty harmful.

I fund? I may adjust and throw some in the future but with 25% of the fund based on Japans economy with their working population in decline..and another 17% invested in the UK economy?...Emerging markets and Canada are not included which I consider a fail compared to more broad International Index funds.

Why does it always seem like the same people who will:

• on one hand tell you to invest in the S&P500 index because it's impossible to pick the right individual stocks correctly in our home country.
• on the other hand claim they can accurately read the international economic landscape and forecast the likely returns of dozens of nations, all while working 40 hours a week in a non-finance job.

Also, Canada will be included in the I fund next year once they swap the underlying index.

Even the “highest growth” Lifecycle fund L2050, has 25% I fund, 12% G fund, 6% F fund. Not counting the I fund, that’s 18% wasted in historically lower risk lower earning funds.

This is just so bad I can't hardly tackle it anymore. I could write forever about hindsight bias, the importance of risk-adjusted returns, the importance of diversifying across asset classes, the positive effects of rebalancing, etc.

Here's a post I made on how including the F fund can improve the return of most C/S portfolios. Return and every other metric.

Long story short, that 18% isn't wasted. I can try to give you a crash course on modern portfolio construction and a host of cognitive biases, but it'll be a lot of information and math. It mostly boils down to this, large improvements to expected risk-adjusted return are worth small reductions to maximum possible returns, and most investors fail in this regard because of hindsight bias and overly optimistic expectations. Is it a little high compared to industry peers? Yes. But that's going to be fixed with the 2055 and 2060 funds available next year.

As he gets older he could move some to F/G if he wants less risk.

This is a fundamental issue with sooooo many people in this sub. Risk is never your friend no matter how old you are. Investors should always be risk adverse, and have to be paid a premium to bear it. When investors think risk is their friend...that they'll always get their historic 10%, despite a few down quarters along the way...it's a destructive attitude for investors. Smart investors have a filter for this - rebalancing across uncorrelated assets. But if you invest solely in one type of asset, and in one country, you lose that filter.

then do a lazy mans choice of Lifecycle funds or even listen to strangers.

The Lifecycle funds here being a well-researched and disciplined asset allocation managed by professionals. The C/S portfolio being the reddit stranger special.

I always encourage people to get smart and learn more

I can't agree enough. So let me ask you, What academic research do you have supporting a 100% U.S. equity portfolio? What major investment firms have concluded in their white papers that such a portfolio is appropriate? Which university courses on investment management and portfolio construction have expounded on the virtues of single country, single equity investing for retirement? I'd appreciate a copy of such a textbook.

This portfolio is recommended exclusively on reddit, and a couple of inconsequential bloggers.

 

[liahna]

@cbc8171 As much fun as this is to go point to point like a high school debate team..you honestly have way more time and interest in this argument than I do.

You’re what, a 20 something Lt spends at least a month of his life each year on Reddit....proselytizing how his opinions on investment are so much better than others. Your knowledge would be much more impactful if you could ever make your points without being condescending what a shame, you could probably do some real good if your posts literally were dripping with self importance every single time.

Show you a textbook? Sorry..I don’t spend my life on Reddit, and I have zero to prove to you.

Best of luck to OP!

 

[cbc8171]

@liahna You say I'm condescending, but it's you turning to personal attacks.

I hope you see past my self-importance to the information I'm conveying, as it will help you also in the long run.

Don't shoot the message.

 

[intelligentthinking]

@nenab What’s your BAH at your new base?

 

[nenab]

@intelligentthinking $800, currently $1550.

 

[provisoire619]

@nenab There is pretty much no reason to spend more than your BAH on housing (a $1250 place on $800). Find somewhere to live with your boys and cut costs. It will help for studying too (as long as you find the right crowd).

 

[kgb52]

@nenab Live in the dorm. Save gas money. Save time (you’ll need it). Don’t spend over your BAH if you do live off base.

 

[768918]

@nenab $16k in savings is probably enough unless you have a particular expenditure coming up.

Aim to Max out your TSP as soon as you can. I didn't until I was an O-4, way too late. Then start and max out a Roth IRA.

 

[joyanta]

@nenab What branch are you? I'm AF, just started UPT about a month ago.

 

[nenab]

@joyanta Air Force

 

[resjudicata]

@nenab sigh I really need to put In an officer packet

 

[mamaferne]

@resjudicata You should! The money is great but being able to take care of your folks is a much better reward. Remember that dumbass officer you used to work for that made life miserable for your entire flight? You can change the environment and make things better! That OE pay is pretty awesome though!

 

[nenab]

@resjudicata Just wait till you see what a Captain makes.

 

[yytg12]

@nenab Fellow O here.

I would take $6,000 off your emergency fund and put that into your ROTH for 2019. I would divest $5,500 from T Rowe and put that in your 2018 ROTH IRA. Make sure to do this before April 15.

What are the expense ratios on your funds in the T Rowe account? Depending on what it is, considering moving to low expense ratio funds or completing divesting the T Rowe account. (Or divest over time to spread out capital gains tax). Look at changing your residency to MS if the state tax is lower

Some people are commenting about your discretionary spending. Gary V has interesting advice. Live like no one else in the beginning (eat shit and invest), so you can live like no one else in the future (be filthy rich).