Q&A: When to Move?

Q:

My son, a govt. worker, is locked into the gov. investment plan and finds it difficult to know when to move between funds in this environment. Any clues?

A:

It's not just difficult to know when to move from one asset class to another, it's literally impossible! There are no clues, because what he wants to do requires actually knowing the future. I know that Wall Street has us brainwashed into believing that a few very "smart" people have an almost magical gift of financial prophecy.

I am going to assume your son is a federal employee. I would suggest he create a balance between stocks (dividing that portion between the C, S, and I funds) and bonds (the G fund) based on his age and risk aversion. Generally, the younger you are the more you should invest in stocks because you have lots of time.

Here's an example of a possible TSP (Thrift Savings Plan) portfolio for someone in their twenties or thirties who is confident they will not panic and sell their stocks, even if the market falls 40% to 50%:

C Fund (S&P500): 18%
S Fund (small cap stocks): 27%
I Fund (int'l stocks): 45%
G Fund (gov't bonds): 10%

Then, once a year, rebalance the portfolio back to its original configuration.