Considering an L Fund? Read this first...
In August 2005, TSP participants were given a new option: the Lifecycle or "L" Funds. The premise of the L Funds certainly sounds appealing. You simply pick a fund that matches your projected retirement date. Supposedly, the allocations of your chosen L Fund will have an ideal risk/reward for your age and projected retirement date.
In reality, the L Funds are simply fixed allocations of the five primary TSP funds. They don't take into account the myriad factors we analyze: trends, seasonality, intermarket relationships, internal market strength, etc. What's more, investors holding the more aggressive L Funds can suffer devastating losses during bear markets like 2000-2002 and the most recent crash.
The table below compares TSPKey's performance to each of the L Funds starting in 2006. These results are based on TSPKey's real-time performance and not on backtesting.
Returns (%)
|
Year |
TSPKey |
L2040 |
L2030 |
L2020 |
L2010 |
L Income |
| |
2006 |
28.61 |
16.53 |
15.00 |
13.72 |
11.09 |
7.59 |
|
|
2007 |
-4.57 |
7.36 |
7.14 |
6.87 |
6.40 |
5.56 |
|
|
2008 |
-20.54 |
-31.53 |
-27.50 |
-22.77 |
-10.53 |
-5.09 |
|
|
2009 |
34.67 |
25.19 |
22.48 |
19.14 |
10.03 |
8.57 |
|
|
2010* |
3.82 |
-2.34 |
-1.77 |
-1.16 |
0.90 |
0.98 |
|
|
CAGR** |
7.10 |
1.02 |
1.60 |
2.22 |
3.59 |
3.75 |
|
*Year-To-Date as of 7/16/2010
**Compound Annual Growth Rate since 1/1/2006
|
