Seeking advice: Choosing between these bad investment alternatives....

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glen12's picture
glen12
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Seeking advice: Choosing between these bad investment alternatives....

Those who have funds locked into the federal government's equivilent to the 401(k) plan, the "Thrift Savings Plan", can only choose between the following investment options:

The "G Fund", which is basically a money market fund in which the nominal value of your principle is safe. 

The "F Fund" ,which replicates the Barclays Capital U.S. Aggregate index of corporate bonds.

The "C Fund", which replicates the S&P 500. 

The "I Fund", which replicates the MSCI EAFE Index of large cap foreign stocks.

The "S Fund", which replicates the Wilshire 4500 smaller cap stocks.

Obviously none of those choices fit into the "Crash Course" world view.  But those are the choices.  No rolling into a self directed IRA while still employed.

Obviously I have opinion about the least bad alternative, I would appreciate the thoughts of the wise people on this board. 

 

cat233's picture
cat233
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Re: Seeking advice: Choosing between these bad investment ...

glen 12,

If I HAD to choose, the "G" Fund.  That is the safest until of course the dollar declines.... Are you sure this all you have to choose from????

Can you quit contributing?  Park what you have in the "G" Fund and start buying gold?

Cat

Mike Pilat's picture
Mike Pilat
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Re: Seeking advice: Choosing between these bad investment ...

If you're truly looking for a long term solution, you can't do money market or bonds. Bonds will eventually crash and burn. When faced with a similar selection, I went with the MSCI EAFE.

I did it because there are at least some foreign countries that I don't think will end up completely shafted by this. Further, the fund diversifies between different countries, which is very important. There is no way that I would feel comfortable locking all of my retirement into any single country at this point. 

I used to contribute a lot more to retirement accounts, but now I pretty much only contribute what will be matched, and even then I have misgivings. I think retirement accounts could be targeted for wealth confiscation and I would rather have at least some of my wealth completely out of the banking system. It really just depends on what your goals are and what your beliefs about the future are.

Choosing the "best" fund available but not having invested any time in sustainable knowledge or any FRNs in gold and real capital would leave you pretty exposed in my opinion. I hesitate to say much more, because A) I don't want to pretend to have a crystal ball and B) It's a personal choice that you will need to make after evaluating your temperament, obligations, goals, beliefs, etc.

Mike

cat233's picture
cat233
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Re: Seeking advice: Choosing between these bad investment ...
Mike Pilat wrote:

If you're truly looking for a long term solution, you can't do money market or bonds.

The only long term solution to making money is to be market neutral and make money up and down or even in a sideways market. ... And then decide what you do with your profits.

Cat

Mike Pilat's picture
Mike Pilat
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Re: Seeking advice: Choosing between these bad investment ...

Cat: Agreed, I said what I did given the lack of selection and control over these choices. Likewise, I should be clear in saying I made the assumption that this was a retirement account that was not going to be very "actively" managed by the owner...

As for profits, those are one of the ultra evil vices of free markets and capitalism, right?

cat233's picture
cat233
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Re: Seeking advice: Choosing between these bad investment ...

Mike,

LOL... The profits give you choice... To buy land, pay off debt, buy gold, donate the proceeds, make the necessary preparations for "doom and gloom."  Smile

And... That is the problem... "ACTIVELY"  manged.  It is your money, no ones cares about it more than you and it should be actively manged by you.  You know I don't believe the, "I don't have time"  scenario... For every person who says "I can't"... there is another who says, "I can" for the same reason.

DavidLachman's picture
DavidLachman
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Re: Seeking advice: Choosing between these bad investment ...
Mike Pilat wrote:

As for profits, those are one of the ultra evil vices of free markets and capitalism, right?

Hi Mike,

Actually profits have been around since well before capitalism, in fact without the capital accumulation in feudalism, capitalism couldn't have been started.  Hopefully capitalism would yield a positive benefit to society as a whole by individuals acting in their self-interest.  Lately, it doesn't look like that theory was correct, at least in the banking sector and large corporations.

As for the investment question,

Truely the investment choices look bad.  Is there an early withdrawl with penalty option or a clause for a hardship withdrawl?  It might be worth taking the hit now and preserving what is left in an investment of your own choosing.

Mike Pilat's picture
Mike Pilat
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Re: Seeking advice: Choosing between these bad investment ...

Yeah, these prepackaged retirement deals are bothersome, if for no other reason than they limit my control. You basically pay a "control risk premium" for the bonus of having a company match your inputs, if that makes any sense.

David: You are absolutely right, I was just making a jab. It is sad to see that we really don't accumulate profits here in America. They are just inflated paper for the most part lately. There are some really, really critical reasons to accumulate profits, whether they be from investing / trading, simply saving excess money from income, or from running a small business.

In one of his more respectable moments, Greenspan put it quite concisely: "Without savings, there is no future."

glen12's picture
glen12
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Re: Seeking advice: Choosing between these bad investment ...

Thanks for your insights.

I actually have been fully invested in the G Fund, which has - despite the dollar's fundamental flaws - ironically benefited during this "Great Deleveraging".  At the same time, I have been slaughtered in my taxable accounts which are heavily invested in energy and precious metals holdings. 

 In the fullness of time, the dollar's weakness will manifest itself  - and I fear that it will manifest itself swiftly and violently.  I guess my preferred next option would be to begining moving some $$ over into the foreign stock fund on big dips, just to hedge against dollar weakness.

But it's ahrd to feel very good about any of those options.  

Nichoman's picture
Nichoman
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Re: Seeking advice: Choosing between these bad investment ...

@glen12...

Federal employee as well.  This past May transferred to G.  Have stopped contributing to TSP because...

1.)  Doubt TSP will be solvent/available within 5 years (reasons that have been discussed).

2.)  Because of limited, poor options, putting any further savings in IRA's and private (most flexibility, options).

Remember 2 options toward taking money out of TSP...if either fits your situation (can read/research  on line).

Hope this helps,

 

Nichoman 

 

machinehead's picture
machinehead
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Re: Seeking advice: Choosing between these bad investment ...

Glen12,

According to the fact sheet for the 'I' fund, its
foreign currency exposure is unhedged. So if the US dollar weakens, the
fund's NAV will go up, even with the EAFE index unchanged.

This
is potentially interesting if you have doubts about the dollar. The
fund is about half in Europe, 22 percent in the UK, and 20 percent in
Japan. Thus it provides some dividend income, some potential for
capital gains if global stocks bottom out, and some diversification out
of the US dollar.

http://www.tsp.gov/rates/fundsheet-ifund.pdf

It
doesn't have to be an all-or-nothing proposition. You could put 20, 30
or 50 percent of assets in the 'I' fund to adjust your risk exposure
and damp volatility.

glen12's picture
glen12
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Re: Seeking advice: Choosing between these bad investment ...

Great insights from all. 

 It's interesting how the mind works.  After taking an absolute beating on investments that I feel certain will - in the fullness of time - come back, it's very psychologically difficult to put 'at risk' money that is in an investment that I am equally sure will fall in the fullness of time.  It's a time when walking the walk - and possibily taking an additional short to medium term beating - is pretty tough to do.

strabes's picture
strabes
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Re: Seeking advice: Choosing between these bad investment ...

If you want to keep funds in the 401k, G is the only option.  G.  G.  G.  

There is a risk that the IRS will seize 401ks and IRAs in 2010 as the full weight of the depression sets in.  I don't know how to quantify that risk, but it's non-zero.  So keep your money in G for now, but if smart money starts believing that the IRS will do this, move quickly to liquidate the account, pay the withdrawal penalty, and buy gold.   

The notion of diversifying globally is like diversifying across industries.  That's just retail brokerage gibberish for "put all your money at risk" because all industries are correlated, all countries are correlated.  What are they correlated to?  The global banking system, i.e. the debt and derivates mess.  That system is crashing.  All countries, all industries.  Do not follow the advice to get diversification away from the $.  The $ will remain the reserve currency until the debt deflation is over and the Pound, Aussie $, Euro will decline at the same time.  Once deflation is over, the $ will crash, but so will other currencies except perhaps the Yen and Swiss Franc.  Gold is the best option at that point.  But that point is nowhere on the horizon yet.  The world still thinks passive Americans will put up with the IRS stealing all our money to pay our debts.  Until you see that opinion change, which will be reflected in the bond markets (an indicator that grossly higher yields in Treasuries are coming), do not run from the $.  The long-term story is absolutely true...yes the $ is doomed...but it's way too early to invest that way...deflation will punish you.  

Fyi, G isn't totally risk free either...the statement that the principal is guaranteed is specious in a depression in which we're going to see hundreds of companies, banks, cities, states go bankrupt. Money market funds are composed of the debt instruments of those institutions, so as they fail, money market funds can indeed lose principal.  But it's the most risk free given your options.  If you ever get the option of a "treasury-only" money fund, shift into it.  

dmger14's picture
dmger14
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I know this post is two

I know this post is two years old, but somehow came up when I tried to visit this site.  I am also a government employee who thinks like you all do.  I only match as well, and have my money in the G fund.  When the market crashes again, I may switch to the I fund though I realize other countries/stocks will be dragged down as well.  It is my understanding that you CANNOT cash out your TSP even at a penalty.  The bottom line is that your money will be there for confiscation until you retire and have access to it.  All I can do is try to manage it as best as I can and hope they either change the rules on withdraw (to spur spending and keep the ponzi going?), or don't confiscate.

If I am off base here, let me know.  I would gladly cash out at a penalty today if I could!

OITW's picture
OITW
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dmger14 wrote: I know this
dmger14 wrote:

I know this post is two years old, but somehow came up when I tried to visit this site.  I am also a government employee who thinks like you all do.  I only match as well, and have my money in the G fund.  When the market crashes again, I may switch to the I fund though I realize other countries/stocks will be dragged down as well.  It is my understanding that you CANNOT cash out your TSP even at a penalty.  The bottom line is that your money will be there for confiscation until you retire and have access to it.  All I can do is try to manage it as best as I can and hope they either change the rules on withdraw (to spur spending and keep the ponzi going?), or don't confiscate.

If I am off base here, let me know.  I would gladly cash out at a penalty today if I could!

This is my first $.02 post, so take it as such.  I stopped paying in altogether for several reasons.  I firmly doubt the USG will ever be able to pay out from this fund when I reach eligible age.  But as you saw, you can not/NOT withdraw from it, ever.  All you can do is borrow from it.  And as I discovered when I began my divorce, 50% of what I put in there is hers.  It is not negotiable in court, it is gone.  Gone.  And the 50% that is mine?  I can not/NOT borrow from it without her written approval.

I did it as military, so I didn't even get matching funds, either.  As far as I'm concerned, it's $40k pissed away--that's a helluva lot of single malt Scotch.

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