Personal risk tolerance. Go to the website of tsp.gov. Print out the annual rate

Question

Personal risk tolerance. Go to the website of tsp.gov. Print out the annual rates of return on the G, F, C, S and I funds. Look at the annual rates of return, the years the funds lost the most and made the most. Think about your risk of tolerance. Would you want to keep your money in the super safe G fund, and never lose money but never make a lot? Would you want to put your money in the F fund (fixed investments like bonds). The C common stock fund or the S fund that invests in small stocks? Imagine that ypou have just $120,000 and that you want to put $100,000 of it into retirement investments> How would you allocate this $100,000 accross the five TSP funds? Discuss your tolerance risk and why you allocated the money the way that you did.

Explanation / Answer

Since you want to save for retirement, I would allocate 70% in finds C and S . The remaining 30% would be allocated across G and F

Since retirement is long term, I would allocate maximum into equity (70%) and a small portion in debt (30%)

In the 70% I would allocate 40% to C common stock fund and 30% in small stock fund. The 30% in debt would be allocated as 20% in Bonds F and 10% in G.

So my final allocation will look like this:

40% in C, 30% in S, 20% in B and 10% in G

My goal is to earn the maximum for retirement and small fluctuations in the equity will not affect long term wealth creation.

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