I’m a huge fan of the Thrift Savings Plan offered to Federal Government employees, including military personnel.
A cheaper investment platform I do not know. The funds in the TSP average 3.3 basis points in expenses. That means for every $1000 you have invested in the TSP your cost is 33 cents.
That’s incredible Think about it another way, if you pay 1% in investment expenses it’s going to cost you $10 per $1000 per year.
Your investment manager must have some pretty good chops to overcome that starting point. And, in fact, he/she most likely won’t.
IN this episode I analyze the G fund in the TSP. The G Fund is the Government securities fund.
I show you why you shouldn’t expect more than around 3% a year in rates of return over the next decade. Doesn’t mean I think it’s a bad fund, it just is the reality of the interest rate cycle.
Remember folks, bonds do not have capital appreciation. You get paid interest and interest only. That interest you receive is determined the day the bond was issued.
A 10 year Treasury bond issued today (July 2018) pays 2.85%. Thus if you invest in a 10 year Treasury bond you will get… 2.85% return over the next 10 years. No more, no less. It’s basic math.
Yet a lot of people want to say “Well the fund did XYZ% over the last 20 yrs so we should be able to get close to that.”
Nope Not in bond funds. The only thing that matters in bond funds and government bond funds in particularly is the coupon at issuance and thus the yield it’s paying today. Nothing else matters.