Diversify Thrift Savings Plan?
Jim wants to know if he should diversify the 200K he has in his government thrift savings plan, or just diversify from now on.
QUESTION: Jim is a government employee. He has 100% of his thrift saving plan in the C fund. He has $200,000 in the thrift savings plan now. Should he leave it all in the C fund and diversify from now on? Or should he diversify the $200,000 that’s already there among the C, S, and I funds?
ANSWER: The S is a small-cap index fund based on the Russell index. “Cap” means capitalization, which means money and “small-cap” means small company. This would be a start-up company or one that’s just gone public. A lot of the healthcare and technology companies are in that category. Those companies are seldom stable. That’s why the S category has a better average rate of return than the C does with much more risk.
The I fund is the international index, based on a Euro-Pacific index. Index means a spread of companies in the Euro-Pacific part of the world. It has the poorest track record of the C, S, and I funds.
The C fund is a common stock fund like an SNP500 with companies like McDonald’s, Coca-Cola, and Home Depot.
You should not do anything with the $200,000 that you already have invested. From now on, you should put 40% in the C fund, 40% in the S fund, and 20% in the I fund. You’re taking a little more risk with the small-cap businesses and you’re risking as well with the international funds, but you’re also putting a very good amount into the most stable companies in America.