2023/02/102023/02/10 TSP Lifecycle funds beat the Competition Every year I get the statement from TSP providing an update on my Portfolio’s performance for the last year. 2022 was not a good year… to put it mildly. But I’m not feeling too bad or pessimistic, as a simultaneous dip in both the stock and bond markets has not happened in over 50 years (the last time both the AGG Bond index and S&P 500 were down in the same year was 1969). There’s plenty of articles on how and why this happened, and what a rare occurrence this SHOULD be. Fortunately, the TSP and FRTIB saw this coming. TSP divested its Lifecycle Funds away from the Aggregate Bond Index (you know it as the TSP F Fund) back in 2015. As a result, the ‘bad’ year I saw in my TSP Lifecycle (target date) fund could have been much worse if I had my money in an equivalent target date fund with Schwab, Vanguard, or Fidelity. Here’s a look: The TSP L2030 Fund has a 60/40 Stock/Bond mix, so I compared to the Fidelity and Schwab target date funds with similar allocation percentages. L2030 dropped by -10.32 percent in 2022, but Fidelity and Schwab funds with similar stock/bond mixes lost MORE…. as much as almost -17 percent. The ‘Secret Sauce’ for TSP is the fact that TSP uses G Fund for most of its Bond allocation, where private-sector target date funds use the AGG Bond Index (which is called F Fund in TSP). The F Fund/AGG lost -12.83 percent in 2022, so the bond allocation that Schwab, Fidelity, and others use as a ‘shock absorber’ in target date funds to compensate for stock market corrections did not do the job in 2022. On the other hand, TSP Lifecycle Funds largely use the G Fund as the ‘shock absorber’, and as we know the G Fund has “Never Had a Bad Day” (quoted from former TSP Director Greg Long, which is still the truth). The allocation to G Fund is why TSP Lifecycle Funds did not crash as hard as their private sector target date fund peers in 2022. Will TSP Lifecycle Funds miss out on an AGG/Bond market rally in 2023? Only time will tell. But I’m keeping my defined-contribution retirement assets with TSP, for lots of reasons mentioned on this website. For those of you who want a TSP refresher/further reading: 4 Reasons TSP Has the Best Target Date Funds G Fund is the Unicorn of Investing $231 for the Mutual Fund Window may be Worth It 46,000 reasons TSP is better than your 401k Related PostsTSP Mutual Fund Window to cost $231 per year46,000 Reasons TSP is better than a 401(k)TSP Board sees F Fund as a Ticking Time BombAre Feds (and Veterans) Over-Allocated to the TSP G Fund?TSP Wants to know your Race, Birthday, and Education?TSP Takes 88 days to process a Rollover(?) Related Federal Employee Benefits FERS Retirement Thrift Savings Plan FERS BenefitsFERS RetirementSaving for RetirementThrift Savings PlanTSP G Fund