The Best TSP fund for 2022 (and why) - YouTube

you want to know what the best tsp fund is this  year with the stock market taking some losses and  

the concerns of continued inflation it's hard to  know what to choose or if what you currently have  

is right after explaining which fund is poised  the most for growth i'll explain why timing the  

market will lose you money over the long run next  i'll explain why picking one strategy and sticking  

with it for the long term will outperform everyone  else you know i'll help you choose the best asset  

allocation and i'll give you the confidence that  it will work this year and every year no matter  

what's going on in the world okay here's your  answer for which fund is best the best fund is  

the c fund but it's not for the reasons you would  expect hear me out on this pandemics stock market  

housing crashes crazy elections insurrections  martian invasions and things we haven't even  

imagined yet should not matter for choosing the  best way to invest in the thrift savings plan the  

answer is always the same and i'll explain why if  you haven't clicked away yet and discussed you're  

like but rich interest rates are going up and  we seem to be at the top of the housing market  

gas prices are all over the place surely we should  make some adjustments so we avoid losing money  

if stocks go down any further this is a very  natural way to think but as i've learned over  

my adult years of investing it's also a flawed  way of thinking this way of thinking is called  

timing the market it's adjusting your investment  strategy because it seems like a change is about  

to take place you move your money over to safer  investments treasuries or bonds to avoid losing  

money if stocks crash then you put it back into c  s and i funds which is s p 500 index small mid cap  

stocks and international just before the market  starts climbing again i can think of two recent  

examples of where people maybe you tried to do  this and lost lots of money one was when trump was  

elected several people moved their money to cash  fearing the stock market would fall nope it went  

up again second was the kobe pandemic same thing  people freaked out and sold their stocks thinking  

everything would drop it didn't it kept going  right on up timing the market will screw you over  

leave your money alone there are also popular  tsp investment websites and strategies that tell  

you when to buy and sell which funds these are  wastes of money and bad ideas and many people  

believe hiring quote-unquote professional money  managers will accelerate their growth i have a  

very unpopular opinion to tell you that is  unfortunately 100 true none of these methods  

work in the real world people that think jumping  in and out of investments at the quote unquote  

right times will make you more money than just  staying in the same investment if you follow  

any of these market timing strategies which  involve predicting or essentially guessing which  

investments will do well you will lose money  compared to what i'm about to share with you  

simply invest in the c fund which mimics the s  p 500 index invest in that and don't make any  

changes based on any news any experts or any  lame reasons you can think of and you'll come  

out on top suckering people into believing that  it's possible to predict the best investment in  

the short term is a multi-billion dollar industry  most of wall street is built on this lie they make  

you believe that if you pay for their help their  expertise their guessing ability you can predict  

the drops in the market and avoid them as well as  predict the jumps in the market and exploit them  

and the reality is by trying to do this you'll  lose more money than the people who simply invest  

their money for the long term and never touch it a  quick story about warren buffett arguably the best  

investor in the world to illustrate this point  how he made a fool of the professional investors  

and the entire investment manager industry he did  this by making a bet a bet that no professional  

manager or hedge fund could outperform the s p f  500 index over a 10-year period this means passive  

investing which is essentially doing nothing  would outperform professionals making trades that  

they thought were smart for their clients only one  person took them up on the back presumably because  

most money managers are smart enough to know they  can't win several years into the bet the s p 500  

was way ahead of the well-known hedge fund and the  hedge fund manager admitted defeat i think the bet  

was for a cool million for charity a great cause  why did warren buffett make this bet another good  

question why did warren buffet instruct that all  his money be put into the s p 500 index when he  

passes away because he understands a fundamental  truth about investing that the so-called experts  

don't want to know investing in the s p 500 index  or really just investing in the stock market in  

general over the long term vastly outperforms any  other method especially professional investors  

they claim they can manage your money for you  for a fee of course no one knows when and how far  

markets will go up or down it's a fool's errand to  try and plenty people will charge you even though  

they won't outperform the s p 500 index over the  long term there are lots of statistics on how the  

s p 500 index has performed over time but it is  widely accepted that it has grown at a compounded  

rate of approximately seven or nine percent a  year on average you only get these results if you  

invest in it and never move your money around in  reaction to any type of news or event no jumping  

in and out of the market every time a pandemic  occurs or someone you don't like is elected as  

president i keep saying the c fund or the s p  500 index is the best asset allocation for this  

year or really for any year but it's not quite  that simple there are several similar variations  

of this asset allocation that could do slightly  better or worse than just investing in the s p 500  

index all of them will do better than professional  managers or timing the market i'm going to give  

you several investment strategies to choose from  that will work long term as long as you stick  

with them and don't buy and sell when you get  scared or when others tell you to do something  

i have another video up here somewhere that goes  over these choices in more detail but i'll whiz  

through these right now and show you how to invest  in them using the funds available in the thrift  

savings plan or tsp i already covered the s p 500  index you can mimic that in your tsp portfolio  

simply by investing in the c fund easy money i'll  go over for the variations that are popular the  

total stock market index the warren buffett  tsp allocation which is a slight tweak on  

the sap 500 index dave ramsey's tsp investment  advice and the most popular strategy by far my  

personal allocation the rich carry worldwide  domination strategy let's knock these out  

first is the total stock market index strategy  this investment choice is a popular one and is  

the main recommendation of jl collins in his  book the simple path to wealth probably the best  

finance book of all time so far and i'm not just  saying that because i was a proofreader on the  

book instead of just investing in the largest  companies that make up the s p 500 you invest  

in those plus medium and small companies this  index encompasses the entire u.s stock market  

just like the name says it's more diversified  than the s p 500 and small caps have been known  

to slightly outperform large caps over the long  term albeit with more risk the s fund in the tsp  

is an index of small and mid-sized companies not  included in the s p 500 index therefore a mix of  

80 c fund 20 s fund will closely mimic the total  stock market index fund next is the warren buffett  

tsp allocation all i mentioned earlier that the s  p 500 index allocation was something recommended  

by warren buffett he actually has a more specific  instruction on how his wealth will be invested for  

his family once he passes away a slight tweak  is necessary he plans to invest it in the s p  

500 index no surprise but he also plans to have  10 bonds the reason for this is that the amount  

of bonds you add to your investment will lower  the volatility in a down market as luck would  

have it tsp's f fund is made up of bonds you can  mimic the strategy for warren buffett's trust with  

90 c 10 f thanks warren next is dave ramsey's tsp  investment advice people seem to love this guy  

he's absurdly popular he actually has two sets  of recommendations his more conservative tsp  

allocation recommendation is 80 c 10 s 10 i fund  and his less conservative is 60 c 20 s 20 i fun  

thanks dave note the i fund is an international  index fund now for what my friends describe as the  

quote-unquote best investment strategy in the  world so far there are literally tens and tens  

of people who google rich on money tsp allocation  every year until now nobody has ever known how one  

of the most brilliant minds of our time invests  in the tsp i like the idea of being a little bit  

heavier weighted on small and mid-sized companies  as opposed to being just all s p 500 index i could  

accomplish this with the total stock market index  but i want even more exposure to small companies  

not a fan of the tsp's international fund and  they haven't been investing in it it doesn't  

have enough exposure to small and or developing  countries so here's what i settled on the rich  

on money worldwide dominance tsp portfolio is  drumroll 50 s 50 c i know i know i should be  

charging an arm and a leg for this information i  just have too much altruism in my heart and nobody  

watches my videos don't stress about picking the  right one of these investment strategies it's  

probably mine anyway any of these will do better  than most people do with professional managers  

now i'm going to talk about adjusting your tsp  portfolio for your age and risk tolerance this is  

different and safer than jumping in and out of the  market i made a separate video about this which is  

deep in the weeds watch it up here by clicking  on that thingy that you see but i'll explain it  

quickly right now many people invest in 100 stocks  when i say stocks i mean either cs or ifund we  

often don't have any fixed income that's bonds and  treasury bills in our portfolio as a hedge against  

market risk bonds and treasury bills are safe they  don't go up or down with the stock market they  

just have a very small almost guaranteed rate of  return kind of like a really good savings account  

it's wise to put a specific percentage of fixed  income f or g fund which is bond or treasury bills  

into your portfolio of stocks to lower the market  risk as you near retirement for the thrift savings  

plan stocks are the c s and i funds and  fixed income are g fund treasuries and f  

fund bonds here's a quick example of how to use  bonds to protect your tsp if you have 50 or half  

of your portfolio in stocks and the other half in  bonds fund in this case when the market suddenly  

drops thirty percent in one day you'll only  drop about half of that fifteen percent because  

you're only half invested in stocks the bonds you  have won't lose value this limits your downside  

here's the problem if the market shoots up just as  much in one day you only go up half of that or 15  

because you're only half invested in stocks it's  a double-edged sword lose less than down markets  

but make less than up markets here is some simple  guidance for achieving the right balance of stocks  

and bonds for your age i use the law of 120 when  it comes to the percentage of your portfolio that  

should be in stocks you subtract your age from  120. a 40 year old will be 120 minus 40 equals  

80 of stocks so you need 20 bonds which means 20  percent of fund some people use the law of 100  

instead of 120. it's much more conservative  or safer you can adjust this number based on  

how risk-averse you are here's some questions  you could ask yourself and decide between 100  

more conservative or 120 less conservative do i  have a higher or lower risk tolerance than other  

investors in my age group is this my only source  of income or do i have things like a retirement  

a pension or a sugar mama i'm currently looking  for a sugar mama by the way this is rich on money  

here's a spot to subscribe to me here's two  other videos youtube thinks you should watch  

next if you just want to binge amazing stuff like  most other people do rich on money signing off