Reply to Hating the TSP -- opinions on how to invest?

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[quote=Anonymous]People hating on the G fund do not understand how incredible of a deal it is.

Always have some money in the G fund.  It is free money, and you always take free money when offered.  This is just like contributing to a 401(k) to at least the company match.

The G fund is great because it largely eliminates risk while keeping a solid return.  Your commercially available bonds tend to break down in 2 ways; long duration with subsequently higher returns to compensate for the increased risk, or short duration with low returns.  In other words, if you are holding a bond with a 30 year maturity you are going to want a greater return on your investment then a 1 year bond.

The G fund flips this on its head.  It is a long term bond (generally 9-10 year maturity on average), however its price is recalculated either weekly or monthly.

In other words, the G fund is a short maturity bond with returns similar to a long one.

So, free money.  Even with a high risk portfolio there is room for a G fund as it allows you to take extra risk elsewhere.  In other words, if you feel comfortable running 80% of your portfolio in equities and 20% in bonds, holding G fund instead can let you shift that a bit to 80+X% equity, and 20-X% bonds, depending on your new risk profile.[/quote]

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