Thrift Savings Plan Investments

What are the Thrift Savings Plan Investments?

The Thrift Savings Plan offers 10 investments from which plan participants can choose from. These are funds, but not mutual funds. These are tax-exempt trust funds managed by Barclay’s, and are not open to individual investors.

Each of the funds offers incredibly low expense ratios at just .15%, where the industry average expense ratio is actually around 1.34%. Of course, the smaller the fees, the more money the investors get to keep!

• G Fund - The G Fund is primarily invested in U.S. Treasury securities with incredibly short maturity periods. This combination makes the investment very secure. In fact, the TSP states there is no risj to loss of principal and very little volatility of earnings.
• F Fund - The F Fund is a relatively safe investment seeking to match the performance of the Lehman Brother's Aggregate U.S. Bond Index (LBA).
• C Fund - The C Fund is a common stock investment fund which seeks to match the performance of the S & P 500 Index. As such it carries a significant amount of risk by investing in it.
• S Fund - The S Fund is a small capitalization stock fund which seeks to match the performance of the Dow Jones Wilshire 4500 Index. This investment carries a much higer risk vs. reward factor as small capitalization stocks tend to be very volatile.
• I Fund - The I Fund is a very aggresive international investment seeking to match the performance of the MSCI EAFE (a.k.a Morgan Stanley Capital Internation Europe Australasia Far East). Investing in international territory is very risky, but carries a much higher potential for substantial capital appreciation.

Thrift Savings Plan 'L Funds'

The Thrift Savings Plan investments include the 'L Funds' , a.k.a. Lifecycle funds. From an industry perspective they are also called target date funds. These are essentially a "one fund solution" for those individuals who don't know how to choose an appropriate allocation for their situation.

The L Funds include:

• L Income
• L 2010
• L 2020
• L 2030
• L 2040

An investor will simply choose the single L Fund that most closely relates to his or her retirement date. For example, if you were born in 1973 and you plan on retiring at age 65, you would probably choose the 2040 fund to invest in. As you progress toward your retirement, the fund will automatically become more and more conservative. When you finally approach the year 2040, the fund will have shifted from an agressive investment to a relatively conservative one.

The underlying Thrift Savings Plan investments are simply variations on each of the G, F, C, S, and I funds. These is known as funds of funds. In other words, each of the L Funds invests in the various other TSP funds in different proportions. The Income L fund, or the the 2010 L fund would naturally have a heavier weighting in the the G and F funds than the others, while the 2040 fund would have more weighting in some of the more aggressive funds like the C, S, and I funds.

L Series Funds fact sheet

Here is a fund comparison chart for the Thrift Savings Plan investments