It’s a good time to get aggressive with your TSP investments

Tom Temin Golly, these swoons are what we said we’d sign up for by being investors. But it’s been quite a roller coaster lately.

Abe Grungold This is the perfect buying opportunity. It’s like an Amazon sale that every TSP investor should take advantage of. I’ve been a TSP Investor for 38 years. I have separated from Federal Service now three years, and I take my TSP investing very seriously. And if you want to be successful in the TSP, you have to learn how to ride the roller coaster. And the rollercoaster right now in the TSP is heading downward, straight down. Not like in the financial crisis of 2008, not like during the COVID time period, not like the Ukrainian time period where people saw their balances drop 30 to 40%. Now is the time to take advantage of these downward dips.

Tom Temin Now, regular investors can sell stocks and buy individual stocks if they want to try that, or they can pick different investment instruments. In the case of the TSP, then it’s a function of changing which funds your funds are in. And how do you go about that, and how do make sure that you have the mix you feel you want?

Abe Grungold So let’s just use me as an example. Prior to the election, I moved my entire TSP from the C fund, which is the stock equity fund that mirrors the S&P 500. Prior to the presidential election, moved it to the G fund, the government fund, and you’re moving shares, shares that are shares per price now that there’s a buying opportunity, I slowly started to purchase back into the C fund. And as of yesterday, I made a big move by moving my entire TSP to 50% C and S. I’m going very aggressive because I am going to take advantage of the upward trend when this tariff crisis is over.

Tom Temin The idea is to sell high and buy low.

Abe Grungold Yes, yes, exactly. And I did that prior to the election. Now, as a TSP investor, in the old days, you had to fill out a form, you had send it to New Orleans. Today, you can do it all electronically and you can simply do an interfund transfer from your investments to the fund that you are desiring. So if you’re in the G Fund, the fixed income fund, a Lifecycle fund, you just change your percentages. You do have to make sure your total adds up to a hundred at the very bottom. That’s critical. And you only get two of those changes per month.

Tom Temin And by the way, when you did switch to the G fund prior to the election, you missed a serious run up in stocks that happened after the election of Donald Trump. It’s all gone now, but at the time it went skyrocketing and you missed out on a lot of gains as I recall.

Abe Grungold Yes, my TSP could have earned approximately $400,000 at the beginning of February. But I took the risk of moving my funds to the G fund. I didn’t know what the outcome of the election was. Yes, certainly, there was an opportunity for me to earn more. But I I’ve regained that opportunity now, Tom, because the S&P 500 is down 8%. The NASDAQ is down approximately 17%. So that opportunity has now returned to me where numbers in the stock market are lower than when I got out prior to the election. So this is an excellent Amazon firesale opportunity to get back in. I’m not saying every TSP investor should do this. You should only invest as aggressively as you could tolerate. There are many, many, many investors in the TSP who only invest in the G fund. And many of them are my friends. They are more aggressive with their investments outside of the government, with their IRA, with their brokerage account. But there are many people who simply are 100% G fund and Tom, again, there’s nothing wrong with those people investing that way.

Tom Temin We’re speaking with Abe Grungold. He is a retired federal manager and owner of AG Financial Services. You could argue, one could argue that if you had stayed put prior to the election, you could have saved yourself a lot of churning and a lot activity and you would be in the exact same spot. What I’m getting at is timing the market is also a risky strategy. I mean, it could drop another 30% or it could shoot up 80%. No one really knows. And if you live with the swoons in a given fund, over the long term, you’ll probably be where you would have been anyway.

Abe Grungold Exactly, Tom. Nobody can predict the market. Nobody. But I have never made more than two major changes such as this one in the entire 38 years that I have been a TSP investor. So I see this as an opportunity. But then again, Tom, I’m retired now. I have more time on my hands. When I was a federal employee, I didn’t have time to watch the market But now that I am retired, I can pay closer attention to it and make some changes that benefit me.

Tom Temin And you are retired, of course, as you mentioned, a lot of people are losing their jobs right now. We just have this turmoil, for example, at the Health and Human Services Department. We saw it earlier at USAID, and on and on it goes around the government. A lot of the people have been in the government for a long time. They have a TSP account. They can keep that account. What’s your advice for what to do with your TSP if, unfortunately, you are separated from the government?

Abe Grungold So this is an excellent question, Tom. If you are a federal employee who is going to be separated either through a voluntary retirement or through a [Reduction in Force] or through layoff, I would wait to basically do nothing with your TSP because you want to make sure that you’re going to receive all the matching contributions that the government is owed to you. You want to make sure that all your payroll deductions are going to be hitting your TSP account. There is a bit of a lag time for that to happen. So there are still opportunities for employees who leave federal service to come back to the TSP. But if you completely close out that TSP account, you cannot return to the TSP. You have to start a new one if you ever come back to the government. But certainly you can take your TSP, roll it over to an IRA outside of the government, and you certainly have the opportunity to do that. I’ve been retired now three years. I have maintained my TSP right where it is.

Tom Temin But if someone goes on to another career because, say, they’re RIFed, for example, and they have a substantial TSP, it is still a low-cost, low-load type of investment vehicle to have. So is your advice ‘keep your TSP forever,’ regardless of what you do subsequently in life?

Abe Grungold Yes, look, the TSP is a wonderful investment. I recognized it back in 1987, 1988. And the best part of the TSP is you don’t get those annoying emails from brokers, from people trying to sell you annuities, gold mining, Bitcoin. You don’t receive those phone calls. You do not receive those emails, Tom, not like I do with my Schwab account or my Fidelity account. And I’m not knocking those two companies. They’re excellent companies, but you don’t need to receive those daily emails from those companies.

Tom Temin But as a component of your investments, even after you leave the government, is what I’m driving at, the TSP is a good thing to leave in place because its returns are good and it doesn’t have a load on the returns like some of the commercial funds do.

Abe Grungold Yeah, certainly the TSP is a low cost type of an investment house that really gives you the best bang for your buck. But if you want to create some sort of a legacy where you want to create a charity type of distribution from your TSP or you need to create some sort of an estate plan at that point in time, it might be wise to move your T.S.P. to a different type of investment vehicle.