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[quote=Anonymous]ref the G Fund - the poster criticizing it doesn't know all the facts.

The G fund is free money, and in essence another benefit given to federal workers.

To explain why in simplified terms; bonds are sold either as short term or long term.  Short term bonds carry less risk, but as a result have lower returns.  Think of it like a CD  from your local bank; shorter duration CDs pay less interest than longer term CDs.

The reason why the G fund is free money is that the risk part of the equation (interest rate exposure), is set every few weeks.  In other words, it is a very short term bond risk wise.  But, its pay out is tied to the average duration of USG owed bonds, which works out to around 9 or 10 years.

In other words, the G fund is a very short duration bond that pays out equivalent to a much longer term 10 year duration bond.  To put it back in the example of a CD, it is like your bank offering you a 2 week Certificate of Deposit but giving you the same interest as someone taking out a ten year CD.

Moral of the story - it would be stupid to not take advantage of the G fund if you have access to it.  You should always take advantage of free money.  Even if you have a very high risk profile and want to be disproportionately into equities, you should still maintain a bond or reserve portion.  In general, mixed equity/bond holdings outperform straight equity holdings.  It allows you to have a set aside amount of money where you can actually buy low / sell high, rather than being 100% committed into one asset class.

On top of that, since it is free money, any reserve funds you might have are also well suited for the G fund as again, it is basically free money.  The government is handing you a free % or two per annum with no associated risk[/quote]

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