Episode # 57 – TSP F Fund – What You Need To Know

The TSP F Fund is the Thrift Savings Plan version of a corporate bond fund. However, if you dig a little bit you’ll quickly see why this fund is NOT a corporate bond fund in the least.

Why do I say this? Look what happened in 2008. In 2008 everything, and I mean EVERYTHING got hammered. That is, everything for government bond funds. Government bonds did swimmingly in that year as everyone was fleeing from risk into assurance.

What did a typical corporate bond fund do in 2008? Well look at USAA’s Income Fund, USAIX. It was down over 5%.

What did the TSP F Fund do? It was UP over 5%! The only way to do that was to have exposure to government bonds, such as GNMAs.

Does the F Fund have some corporate bonds in ti too? Yup. That’s why I actually changed my mind mid-episode as to the fund I’d choose for my fixed income holdings, the G Fund or the F.

The F has a broader range of fixed income products in its portfolio. That will lead to a bit more risk but should provide more return too.

In fact over the last 10 years we see that precisely. The F fund doubled the rate of return of the G. In a low yielding environment every percentage point you can get helps, a lot.

So, if you can get say double the rate of return of the G Fund without doubling the risk, that’s a chance I’d take indeed.

Will it ALWAYS double the returns of the G fund? Of course not. It may in fact perform worse. I’ve no clue.

But given it’s track record and history of never having wealth destroying years, I’m pretty fond of the F fund.

Now, mind you, I’m not fond of bond funds in the whole. After taxes and inflation, it’s going to be awful to make any money in them.

But if I needed to put a bond fund into my portfolio, I won’t yell at you for choosing the TSP F Fund.


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Here’s the episode for the G Fund.

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