The *BEST* TSP Investing Strategy! (Hint: There Isn’t One) | Military Money Manual Podcast Episode 38

14,542 grads of the Ultimate Military Credit Cards Course already know why
The Platinum Card® from American Express is my #1 recommended card

Military Money Manual has partnered with CardRatings for our coverage of credit card products and may receive a commission from card issuers. Some or all of the cards that appear on this site are from advertisers and may impact how and where card products appear on the site. This site does not include all card companies or all available card offers. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

Listen to The Military Money Manual Podcast on SpotifyApple PodcastsAmazon MusicAudible, YouTube, or Stitcher.

To learn more about my LADS investment strategy and how to apply it to the TSP, check out my book The Military Money Manual: A Practical Guide to Financial Freedom. available directly from me on my website or on Amazon.

Dozens of 5 star reviews on Amazon and Goodreads:

In this episode Jamie and Spencer discuss several TSP investing strategies and why you may want to go with a particular strategy.

The most important thing is to a pick a strategy and then stick with it through good times and bad. Consistency and a high savings rate can overcome any investing performance issues.

Chasing performance and market timing nearly always ends up in failure. The safer solution is a long term strategy of buying and holding low cost passive index funds, like the 5 TSP Funds: G, F, I, S, and C Funds.

Military Money Manual Podcast Episode #38 Links

Military Money Manual Podcast Episode #38 Transcript

[00:00:00] Spencer: You're going to be far richer at the age of 60, hopefully than you are today. If you consistently invest over the long term and you don't chase performance.

Hey everyone, Spencer here from, founder of the website and author of the new book, The Military Money Manual: A Practical Guide to Financial Freedom, just published last year, and I'm here with my co host, Jamie, to present today's episode on TSP, or Thrift Savings Plan Investment Strategies, Asset Allocation, and Building an Investment Portfolio to help you achieve financial independence. Because that's what our podcast is all about. It's all about achieving financial independence in the military.

I started my site in 2012 to share everything I've learned about personal finance in the military.

[00:01:05] Jamie: Before we get started, we just want to thank you all, as always, for all the reviews and questions that have come in so far. If you wouldn't mind, please leave us a five star review on your podcast app and then subscribe to the podcast as well so you'll see new episodes as we publish them each week.

If you have any questions or feedback about the podcast, you can send that to us on Instagram @militarymoneymanual or via email at Just a quick reminder that this episode is for informational purposes only. We are not investment advisors, and this episode does not constitute investment advice.

[00:01:39] Spencer: Today, like I mentioned earlier, we're talking about investment strategies for the Thrift Savings Plan, which is the retirement investment vehicle offered to government employees and to our target audience, military service members. If you want to go back to episode number two, that's going to be the episode where we introduce the Thrift Savings Plan, and then the last episode we just released, which should be, let me just double check this, number 37, that'll be on the five TSP funds where we deep dive into the five TSP funds, but we will skip all that. 

If you want to get into those and learn about all the different lettered funds and the lifecycle funds, you can go listen to that episode. And then if you want just a brief introduction to the TSP, go listen to our most popular episodes so far, episode number two, everything you need to know about the thrift savings plan.

So today on the show, overall themes that we'd like to think about buying and holding. Keeping costs low and passive versus active investing. So some of the themes that you'll hear us talking about are buying and holding. And what that means is when you go to purchase an asset, whether it's a stock index fund or a bond index fund, you need to think about holding this investment.

Basically for the rest of your life and maybe you sell off little bits and pieces of it as you go along to generate income or once you're in financial independence after financial independence and you don't have reliable income anymore and you just, you're living off your investments, then maybe you borrow against it with a margin loan or maybe you sell little, a couple of shares here and there to generate income for yourself.

Or maybe you just receive dividends, but buying and holding is okay. The classic Warren Buffett and Jack Bogle line of thinking where you're buying assets that you can hold for the rest of your life, keeping costs low. That's all about expense ratios and making sure that you're not paying too much to invest.

And then passive versus active. That's all about passive index funds versus actively managed funds. And if you look at the data on this, we're not going to talk about it too in depth in this episode, but if you just Google passive versus active. Funds in terms of investment performance, passive funds, crush active funds.

And like almost every 10 year time period going back several decades. And it gets even worse when you look at the number of active funds that fold up and just go out of business. So in my book, I talk about keeping costs low. So keeping things automatic, keeping your investments diversified, and then keeping your investments simple, or I like to call it the LADS method.

And on my website, you can go and search asset allocation. That's asset dash allocation. If you're just on, you can just add that after the URL “asset allocation”. And I talk all about my investment portfolio there. If you want to deep dive into this, another good. To start thinking about how to build your investment portfolio, how to build your asset allocation is the Or you can Google white coat investor, 150 portfolios better than yours. And it's a cheeky title, but basically what his point is. We don't know what the best portfolio is, we don't know what the best asset allocation is going to be in the future.

So we just have to pick one and stick with it to have the best returns. And the good news is that the TSP helps you do all these things. So it's a great investment vehicle for military service members. That's low cost. It's automatic because you're contributing. Money directly from your paycheck. It's diversified because you're buying index funds that are invested in either a broad stock market index or a broad bond index.

And again, you can go listen to the last episode for more about the five funds and the life cycle funds. And it's simple. It's only, you've only really got five choices, which five funds do you want to purchase? Yep. And investors need to realize that there's no perfect portfolio and the best one can only be known in retrospect.

It's only after we have the data and we know. What the returns were in a year that the best asset classes revealed. If I had a crystal ball right, I would've told you at the bottom of covid, Hey, buy Bitcoin in Ethereum because it ended up outperforming the S&P 500, but I didn't have a crystal ball.

So all I can do is go based off of the last, a hundred, 150 years of stock market performance and say, Hey, in the long run, you're probably gonna get about a 7% return from the S&P 500 after inflation. After costs, but that's not guaranteed. And if you look at the 150 year history of the U S stock market as represented by the S&P 500, I don't know if there's any one year where it actually returned exactly 7%.

Or, 10 percent and then 3 percent for inflation. I just don't think it's ever done it. But if you look at the average, if you look at the long period of time, that's. That's what it's done in the book Psychology of Money. Morgan Housel talks about being reasonable with your investment or your financial decisions, even if you're not totally rational.

So maybe the totally rational thing to do is to have a super leveraged portfolio of 150 percent of your investment portfolio invested into low grade junk bonds and to have a super complicated portfolio, but just because that's the most rational thing to do. And it's not.

Don't follow any investment advice. It doesn't mean it's reasonable because most of us aren't Gordon Gekko. We're not these wall street traders that have hours of time, have Bloomberg terminals, and have more knowledge than the average Joe on how to do and how to build your investment portfolio.

So even if it's just a hundred percent S&P 500 portfolio, that can be completely. Reasonable, that's Warren Buffett and at one of his letters, or it was one of the questions maybe asked at the, that his Omaha convention was asked, how do you want your wife's money invested after you passed away?

And he said, put 90 percent of it into an S&P 500 index fund and put 10 percent of it in bonds. And that was it. A bond index fund. That was it. He wants his wife's money invested. And this is one of the most successful investors in the world, right? This is a guy who can beat the market. And he knows that it's hard to do.

[00:08:18] Jamie: It's a great point because as you add complexity to your portfolio, your cost increases, your stress increases, you're always worried about making a mistake and you probably will. Statistically speaking, you probably will make a mistake, right? And then you're constantly evaluating and trying to decide whether or not you've made a mistake.

And so then you're thinking about it all the time. You're also going to have more taxes or advisory fees. So there's no guarantee that a super complex portfolio will outperform. The basic S&P 500 index fund and history has proven to us that the majority of people that try can't beat the passive index fund investing strategy.

So you do all this work, you spend all this time and your attention and your money time away from your family, time away from your health and other priorities. And you're still not guaranteed a better return. And that doesn't sound very promising or very worthwhile. So in this game. What we're saying is that the lazy investor is rewarded more often than not.

The less you pay and the less you do, the more you relax and just stick with your strategy. The better your investments will perform. So as we start getting into the TSP strategies that are out there, what we're saying is a theme of them is not to chase performance. You just set it and forget it.

What was the old infomercial, like the oven. I think he's like Ron something, and he's put it in the oven. And everyone would say, set it and forget it. That's what it reminds me of. Don't keep performing.

[00:09:42] Spencer: Yeah. Yeah. Oh, I love that. We'll have to go look that up. Maybe make it a meme for the Instagram page.

But yeah, you can safely ignore all those TSP investing Facebook groups or anybody who's going to charge you for TSP investing advice. They're just going to have some kind of complex, market timing portfolio where they're moving money in and out of the G fund to try to beat. The market moves, but if you go and look at the moves that they made during COVID, they completely missed it.

Everybody, no, nobody saw it coming. The market was at an all time high and then it crashed 30%, 30 days. Nobody saw that coming and market timing is a fool's game. You can look at all the research on this, but we had a guy that we worked with. In Hawaii, he found this website or if he found one of those TSP investment advisor websites, and he backtested their suggested portfolio.

And what he recognized was that there's no consistent market signal. There's no backtested strategy that works in every single market condition. So you could find a perfect strategy. But the problem is that you can't execute it because you don't know what the stock market is going to do next. And the only strategy that really provides consistent long term returns is a buy and hold passive low cost index fund investing strategy.

Or just like I mentioned in my book, the LADS method, you can run the back test on portfolio visualizer and you can see that yes, maybe a different strategy. If you had sprinkled in some gold during the nineties, or if you had gone all to cash before the 2008 global financial crisis, yes, sure.

You would have been great, but whatever signal that you were using, whatever signal worked to, to recognize that, uh, market terminal turmoil was coming, it won't work again next time. It's always. It's always different, but it's always the same because the market always reacts in a way that you would just never think.

And I remember during the COVID crisis, the market bottomed out in a month. But we had bad news, terrible news, like thousands of people dying for a year and a half after that. Yeah. And we didn't have the vaccine until December and then we had all the controversy around that.

So there was a lot of the stock market that is very unpredictable and it can react to news in ways that will just blow your mind where you'd be like, that doesn't make any sense. Why did it go up when X event happened? And it just doesn't make sense. And that's why they call it a random walk because it's completely random. And if you read the book A Random Walk Down Wall Street It's an excellent book that kind of breaks down why the market does what it does and how it's completely unpredictable and every single strategy to beat the market or time, the market eventually fails.

[00:12:45] Jamie: I'll close our longer opening here on overarching strategy. You have to be right twice whenever you time the market, which you might get it. You might get it once you're probably not going to for an average investor. You might get it once. If you do, you're probably not going to get it the second time.

Cause you have to get both at the selling point when it's high. And then again, you have to buy in again at the right time to make it worthwhile. And in the long run, you're just going to lose that game. Almost everyone will lose that game. But before we get into the portfolios that are suggested portfolios in the TSP or some options, maybe not suggestions, it's too strong of a word even, but remember that you can balance your TSP portfolio with other funds.

So you might be heavy in the G fund and TSP because in your Vanguard, you're heavy in the stock game. And then that balances out overall. The strategy that you want between all of your assets at all of the brokerage firms and all of your banks. So keep that in mind this is not a one size fits all.

This is not saying if you do this, we guarantee that you will be a millionaire next year or anything like that. And oh, by the way, we're not also not trying to sell you access to any advice or any other investment course or anything like that. But Spencer, what's the first option that we'll walk through today of a potential strategy for people to look at.

[00:14:03] Spencer: Okay, so the first one we'll talk about is just a hundred percent C fund. It's a credibly simple portfolio if you look at the Average US stock market performance as measured by the S& P 500 over the last hundred fifty years. It's done pretty good. I mean you're looking at a ten percent average annual return before inflation and then after inflation about a seven percent Average annual return and if you look at for the last, 20 or 30 years I mean put in like 1987 there the year I was born and Run that to today.

I mean you could have put $20,000 into the S& P 500. In 1987 and do you know how much money you'd have today, Jamie? No. A million dollars, over a million dollars if you put in $20,000 in, in 1987 and that's just 20. So just and what people don't realize is because of compounding interest is because it's not linear growth, it's exponential growth, right?

Nobody thinks, Oh, if I put in $20,000 today, I'll have a million dollars in 30 years, right? They just don't, you just can't. Comprehend that. And if you look at the investment performance of that $20,000 it went down 50 percent in 2008. So I think I think I ran this the other day and it drops from you having $800,000 in there and a year later you have $400,000 in there, right?

So that stings, that hurts. But if you just hung on and you just rode through the 2008 crisis, within a year or two, you're right back to where you started. And then, like I said, and climbing more. And climbing more. And then you're up to a million dollars by By 2022. So yeah.

So just that's about as simple as it gets low cost, four or three basis points. I think it's 4.9 for the C fund basis points. It's under five basis points. Yeah. 0.05 percent expense ratio. And you own the 500 largest companies in America. So pretty, that's, that's the Warren Buffett bet on America portfolio right there.

[00:16:07] Jamie: Yeah, so the second one we start to introduce some other funds like we talked about last week. What's option number two that we're gonna cover today.

[00:16:16] Spencer: So the second portfolio we'll talk about is the simple path to wealth portfolio. So JL Collins. He wrote The Simple Path to Wealth. It's a great book.

He's got a Blog about it as well. I think it's Yeah. Yeah, that's correct Yeah, because he was from new hampshire and It's a great book he was a stock trader himself and saw the light that passive index funds were the way to go And so it's his letter to his daughter I think of this is how you should invest and what he advocates for is just Put it all into VTSAX, that's the Vanguard Total Stock Market Index Fund, the US. Total Stock Market Index Fund, or as an ETF, as an Exchange Traded Fund, you can find it as VTI, Victor Tango India, and that's a Vanguard US Total Stock Market Fund, and if you want to simulate that, if you want to recreate that in the TSP, you can't just go buy VTSAX or VTI, but what you can do is you can just build a portfolio in Your TSP that is exactly the same or nearly exactly identical and will track the performance of VTSAX.

And that's 80 percent C fund and 20 percent S fund. So that's 80 percent of the S&P 500, and then 20 percent of your small cap index fund. And that is. A recreation of VTSAX inside the TSP.

[00:17:46] Jamie: We talk a lot about VTSAX and CHILL, you're big fans of that one. So that's a good one to consider. 80 percent C, 20 percent S.

Number three option, we start to make it complex probably isn't the right word, cause it's still pretty simple, but we introduce some international exposure. Option number three.

[00:18:05] Spencer: So option number three is a total world stock market portfolio. So in the previous one we talked, that was a total U. S. stock market.

So you own. Every publicly traded company, at least a small fraction of a share of every publicly traded company in America. But the U S stock market makes up about 60 percent of the total global Market capitalization of the world. And so you're missing out on 40 percent of world stock markets by not purchasing or only purchasing us shares.

And so in the TSP, you have the I fund or the international stock market index fund. And we talked in the previous episode about why I don't like the iPhone, because I don't think it's as representative of the world as it could be, it misses out on a lot of countries, a lot of areas of the world, and especially emerging markets.

It misses out on a lot, and actually some pretty established markets like South Korea, for instance, isn't in it. But if you wanted a Vanguard equivalent, this would be VT Victor Tango. There's the ETF version, and there's also an Admiral shares mutual fund version, which I can't Think of it right now at the top of my head, but it's a total world stock market ETF, and you can simulate it, or you could recreate it inside the TSP by doing a 48 percent C fund, 12 percent S fund, and 40 percent I fund.

So that's 60 percent of your funds in US stocks, and then 40 percent of your TSP funds in international stocks.

[00:19:35] Jamie: VTWSX, does that sound right? The total world stock? Yep, that's it. All right. So VT as an ETF or VTWSX is what Spencer was talking about there. 48 percent of that. 

Number four, we start to tilt a little bit of the balance towards some small cap stuff.

[00:19:54] Spencer: Yeah. So one of the not market timings, but one of the market strategies that has performed pretty well and is, it has backtested pretty well is you can add a little bit, you can increase your returns a little bit, and I can't remember if it increases your volatility or not, it probably does because you're increasing your returns.

But it's called a small cap till and essentially what you do is you add a little bit more of the small market capitalization stocks or index fund to your portfolio than you would normally add if you're just market capitalization or market cap waiting. I think Rich Carey talks about this on his site.

He has an article about investing in the TSP, that's And a classic TSP allocation with a small cap tilt would be a 50/50 C and S fund. So Like we talked about in the second portfolio to simulate the VTSAX and chill it'd be 80/80 C fund 20 S fund If you do a 50/50 c and s fund now, you're 2.5 X or two and a half times overweighting the S fund at the detriment of the C fund because it has to add up to 100 percent as a 100 percent for your investment portfolio. So you're overweighting your small cap allocation a little bit and what that's going to allow you to do is, as these companies come onto the market, they might start as small cap companies, but hopefully they grow and they get promoted to the S and P 500.

So Tesla is one of the name brands that everyone's heard of. And they got promoted, I think within the last year, 18 months or so, they grew so much that they went from the S small cap. Index fund and the TSP, and they got moved up to the S and P 500, which means someone that then moved down to the S fund.

So if you own both the C and the S fund, then you own every publicly traded company in America. And you don't really have to worry about who gets moved. It's added to the S& P 500 or who gets knocked off of it.

[00:21:58] Jamie: Lots of good options. We're not done yet. Number five.

[00:22:02] Spencer: So this one is the CSI portfolio. For some reason, when I talk to people about how they invest their TSP around the office at work, lots of people mentioned, Oh yeah, or maybe it's on Reddit as well.

I see it, but they're like, Oh yeah, I do CS and I 50 percent C fund. 30 percent S fund, 20 percent I fund. I don't know where it came from. Maybe it was from some blogger out there. It wasn't me, but just came up with this idea, but it's a ratio. Sure, it doesn't really simulate the total us stock market it's definitely small cap tilted and it does add a little bit of international flavor in there So you could do a lot worse, you could be in 100 percent G fund So I think the CSI fund or the CSI portfolio in the TSP I think you know run some portfolio visualizer backtest that a little bit and see what you get. But yeah, that's a perfectly fine fun and I actually just back tested this.

So if you had a, the 50, and your TSP, you're looking at about a 10.4 percent annual return from nine. That's going back to 1986. And if you had just done S and P 500, you were doing 11 percent return there. And see, it does reduce, no, it actually increases your max draw down to 52 percent by doing the CSI portfolio.

It's not that much, it performs. Over the last, what's that? 30 years or so has performed worse than the S and P 500. The US stock market has done great over the last 30 years. Past performance is no indication of future results. We could have the next 30 years, international stocks could do way better than the U S.

So I think it definitely behooves everyone to have a little bit of international exposure in their portfolio, and the CSI is a way to do it.

[00:23:53] Jamie: So the last one we'll detail as option number six here follows the founder of Vanguard's kind of the Bogleheads. His followers earned that moniker and they have a great forum we've talked about before, right?

But they have a three fund portfolio system. How do we relate that to the TSP?

[00:24:10] Spencer: So the three fund portfolio is a total U. S. stock market. Total us or us bond market and a total international stock market index fund. So Jack Bogle likes to talk about those three funds. You own every publicly traded stock in America.

You own every pub, almost every publicly traded stock around the world, almost 10,000 companies. And you have the stability of adding a little bit of bonds to your portfolio. And there's different ways that you can mix and match these, right? You could have a little bit less bonds. If you're younger, you can have a little bit more bonds.

If you're older. But essentially all you need to do is just have a little bit of the C fund a little bit of the S fund the G Fund and the I fund and you could even split the bond Section if you want to make it even more complex and do a little bit of the G and the F Foxtrot fund, but if you wanted to just build like a pure three fund portfolio, you could do 27 percent C 7 percent S.

So if you add those two up together, then you've got a 34% In US stocks, 33 percent G fund. So that's your bond fund. And then 33 percent in the iPhone. So that's your international stocks there. And that adds up to a hundred percent. And that's a totally legitimate, uh, Bogle heads, three fund portfolio right there.

I think it's pretty bond heavy. And I think it's maybe a little bit too allocated to international stocks, especially since these are more developed countries and you're missing out on all the emerging markets there. But again, like Morgan Housel said, it is much better to be reasonable than to be rational.

And this is a completely reasonable portfolio and I could definitely support anybody who invests like this. So we just talked about six different portfolios, varying from ultra simple, but very high, potentially high risk or volatile. We'll say a hundred percent in the C fund all the way down to a pretty, not too complex.

Because we only have five funds to pick from, but Bogle has a three fund portfolio. But again, the point here is just pick something and stick with it. And, like Jamie said earlier, adding complexity just adds more costs, adds stress and the TSP, you can only do two inter fund transfers or two portfolio allocations every month.

So you really don't. You really shouldn't be using your TSP money to be chasing performance. You should never chase performance, but you really shouldn't be using your TSP to be rapidly adjusting your asset allocation. It's really important just to pick something and it sucks because.

Everybody says just, go with what you have. And if you start off with not, maybe you're way over weight into bonds. It's not too late. I would say that as you learn more about asset allocation, you might think, Oh, I've got to take away some of my allocation of bonds, or maybe we have to add some more, but it's most, the most important thing is to.

Pick a reasonable strategy and then stick with it and pick something that's not going to wipe you out because that's, again, go read psychology of money. It's an excellent book, but the most important thing is just to not get wiped out. And if you can keep going and allow compounding interest to go to work for you, even if it's at a pretty low rate, right?

Even if it says that just at the 4.7 percent that the G fund has averaged over the last 30 or 40 years since the TSP was inaugurated. You know that's still a substantial portfolio. If or return if you're getting that after inflation let's turn

[00:27:38] Jamie: You're saying do something to summarize your point.

That's right Just wanted to point that out.

[00:27:44] Spencer: Yeah, we'll do something initially but then and then stop doing things yeah, but let's pivot now and talk a little bit about our personal portfolios. 

So Jamie, how do you have your TSP portfolio set up?

[00:27:57] Jamie: So just as a personal vignette as obviously not an investment advice saying that you should make it exactly like mine.

I started out following Dave Ramsey's method of 60, 20, 20 between the C, S, and I, and that worked for a while. And then I reallocated I'm currently 40, 30, 30 between the C, S, and I, and again, that balances out my other. Brokerage accounts and other assets and things like that. So that's not my overall portfolio at all.

It does not line up to that at all, but in the TSP 40, 30, 30, I think in the next week or so though, I'm probably going to just adjust it slightly to 45, 35, 20 And, but I was really happy for several years with 40, 30, 30, and my personal investment performance over the last 12 months when we recorded our end of year episode at the end of December, last year of 2021 was like, I don't know.

36 percent or 29 percent or something very nice right now. It's not as nice. It's below 5%, just a little bit below five now, but I know in the long run, it'll come back. So I hesitate to adjust it just cause it's down. It's not adjusting just because it's down.

But, uh, I might make a small tweak there, but right now I'm at 40, 30, 30 between. C, S, and I. 

What about you?

[00:29:18] Spencer: Yeah. So like you said, it's important to remember that it's their total portfolio that matters. So for me, my overall portfolio is 70 percent US stocks, 25 percent international and 5 percent bonds.

And that's my goal. At least I'm slowly getting to 5 percent bonds. And I might actually reduce that to 65 percent US stocks, 25 percent international, and then bump the bonds up to 10%. COVID was a wake up call when you see your portfolio. It was, I think it was my first time I lost six figures and when you, and I didn't lose six figures, right?

Because I didn't sell. I stayed the course. But it is tough when you log into that account and you see it going into the red after it's been up and to the right and green for so long, it makes you question a lot of your investment decisions, a lot of the choices you've made and.

To me what it I was a hundred, basically a hundred percent stocks before the covid crash of February, 2020. And afterwards I started moving my contribution. So I changed my contributions to the TSP to be 50% F fund and 50% G fund. So I wasn't purchasing stock funds in my TSP for the last two or three years.

And that was just to move my overall asset allocations very slowly, but tilt it more and more so that I'm moving more and more towards having more bonds in my overall portfolio. And just as an example, right? Let's say you had $800,000 in Vanguard. In VTI, a total U S stock market ETF. And then you had $200,000 in the G fund in your TSP.

That's a reasonable 80/20 stock to bond ratio right there, right? 80 percent stock 20 percent bonds. So if your TSP is all in the G fund But all your other assets are invested in Bitcoin or Ethereum. You have a pretty, risky and weird portfolio there, but it's, again, it can be completely reasonable.

If you say, look, my TSP is going to be there when I retire, and I know the value is not going to go down because I know I've got it in the G fund and. I take my risks in other funds or other accounts. Yeah, that's fine. You have to consider your total portfolio. So it's almost meaningless when people talk about how they've allocated their TSP. Unless all of their money all of their retirement money is in the TSP and then it becomes Extremely valuable and extremely important to how they've allocated Their TSP.

So for instance like I hold Or I used to hold up until a couple of days ago when I actually purchased some bonds at Vanguard, but I used to hold all my bonds in the TSP. And then my Vanguard, so if you've logged into my Vanguard account, it looks like a very stock-heavy portfolio because it was 100 percent stocks.

And I didn't have any bonds in my IRA or taxable account, but I've. I'm starting to add some bonds outside of the TSP into my Vanguard IRA account. Okay. So long story long, as of this recording, I've got $330,000, in my TSP account, so that's how much I managed to save after a 12 year Air Force career.

And I don't think I even started contributing to the TSP until I was a first lieutenant. So I think it was about two years, maybe even captain. It can grow pretty quickly, but I've, I'm about evenly split. I thought this was interesting about evenly split between the Roth and traditional accounts.

So I've got about 165 in the Roth and 165 in the traditional. And my over, like I said, my overall portfolio. 70 percent U. S. stocks, 25 percent international, 5 percent bonds, maybe tilting more towards 10 percent bonds eventually. But in my TSP, it's random. It's 67 percent C fund, 14 percent S fund, 10 percent G fund, and 9 percent F fund.

So I've almost got 20 percent of my TSP invested in bond index funds. And, like I said, my overall portfolio, I have less than Less than 5%, invested into bond index funds. So it's, what's really important is to consider your total portfolio and then set it up so that across all your investment portfolios.

You are allocated in the way that you want to be. And for me, I don't own any I fund shares or any I fund inside the TSP because I want to hold my international shares at Vanguard because I think they have a better international index fund product.

[00:33:55] Jamie: To summarize all the different potential strategies that we talked about today, what's the best one to do?

[00:34:03] Spencer: The best thing to do is Just pick one, just do something. And that could be, you might, after listening to all this, you might think I'm even more confused than I was before. That's okay. Keep educating, keep learning. And the right answer for you might right now might be a life cycle fund. The life cycle fund is a professionally developed fund.

At the, uh, at the TSP and it's a target date retirement fund. So it's going to start out super heavy into the C, the S and the iPhone CSI. There you go again. And it's 99 percent allocated to stock index funds initially. And for the next 15 years until 2037, it's going to be invested in those funds. So now is the time if you're super confused and you don't know how you want to build your asset allocation or your investment portfolio, just go with the life cycle fund.

And you could, again, it might not be the. Optimal, rational, perfect solution, right? And it might not be, but it might be. And most importantly, it's a reasonable choice. You're not going to, you're not at risk of getting wiped out. Your money's going to be there. It's going to go up. It's going to go down.

But over the long run, it's going to grow. You're going to be far richer at 60. Hopefully than you are today. If you consistently invest over the long term. And you don't chase performance.

[00:35:27] Jamie: Yeah. So we covered a lot of good details about the TSP over the last couple of weeks. If people have more questions or want to dive deeper into the TSP, remember that you can Google thrift savings plan military review.

And that'll pull up a number one hit. There'll be Spencer site, the thrift savings plan, military review with dashes between those last words.

[00:35:50] Spencer: Thanks again for joining us today for the episode on strategies for investing your TSP. TSP is an incredible benefit for your retirement savings goal.

It's a big part of my plan to achieve financial independence while I serve in the military, and I talk a lot about it in my book. The Military Money Manual, which is now available on Amazon prime, free two day shipping Amazon Kindle as an ebook and Amazon audible. You can go back to our most popular episode number two, where we talked about the TSP in detail, and you can go back and listen to our last episode, which should be number 37 where we talk about the five TSP funds.

[00:36:32] Jamie: If you're enjoying our podcast, we would appreciate a five star review. Thank you for those of you that have reviewed the podcast on either Apple podcast or Spotify, or even audible for the few that listened to there. We appreciate all the reviews we've received so far, and thank you for all the support from the listeners.

It means a lot to us. Don't forget to subscribe to the podcast so you don't miss future episodes. And if you have any questions or feedback, as always, you can message us on Instagram @militarymoneymanual or email at Catch you on the next episode of the Military Money Manual! 

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.