Reply to Federal employee, how do you choose your TSP investment?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]100% C - all stock, 650k saved 15 years to go.[/quote]

A guy happily retiring in two weeks just told me to do this yesterday. That and to start using VIP now because there are added tax savings and workarounds available that way. Does anyone have any advice on the latter? [/quote]

Yikes, that is scary advice re 100% C.

What is VIP?  I've never heard of it.[/quote]

I believe he's referring to supplemental vision/dental plans - also known as FedVIP.
https://www.benefeds.com/

The C fund is the S&P500.  It's the 500 biggest companies in the US.  I'm not sure why that's scary though I don't see why people wouldn't use the S fund as well.[/quote]

IMO any investment strategy that puts 100% in anything is foolish and asking for trouble.  I know what the C fund is (duh) ... if you look at what would have happened if you were 100% C in 2008 vs. diversified among the funds, you'll see you would've gotten killed ... -37% (slightly better than S or I).  The S Fund was down 38% in '08.  So a portfolio of those 2 funds would get creamed.

By being diversified among all the funds you reduce risk -- I cut my losses more than in half (-16% that year), saving well into 6 figures of losses I would've had in an all C Fund portfolio.  And from 2000-2014 averaged ~10% annual return (including 2 down periods in 2000-02 and 2008-09).

It is much harder to recover from large losses than it is to have steady smaller gains when things are up, and avoid huge losses when they go down.  A 100% C fund allocation (or any equity fund especially) puts you at serious risk of getting in a hole it will take years to recover from.

I don't know any competent investment advisors who recommend going all in on any one sector or holding.

[/quote]

The s and p 500 is not one sector or holding! If you have the guts for it, investing all your money in the spdr in your twenties and keeping it there until you are almost retired is one of the smartest things you can do. Diversifying to small cap or intl is icing on the cake. The problem is, most people lack the courage to initiate this and the fortitude to continue it. Hence the booming advisor industry. 
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