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TSP Folio is a systematic investment strategy for U.S. Thrift Savings Plan participants. It aims to capture most of the market’s good times and miss most of its bad times, to offer stock-like returns with bond-like volatility. We actively manage risk, switching out of TSP stock funds and into bond funds when the going gets rough. By focusing on capital preservation (missing severe market drops), investments recover more quickly during rebounds, and continue to compound gains. The resulting peace of mind allows investors to stick with the strategy for the long term.
A hypothetical TSP account invested in the TSP Folio strategy would have compounded annual gains of over 11% per year, with only a single down year during the past 28 years. The strategy successfully avoided the stock market crash of 1987, the bear market of 2001-2003, and the global financial meltdown of 2008-2009, never suffering more than a -11% drawdown (peak-to-trough portfolio decline). And it did so while still maintaining a diversified, conservative portfolio allocation of about 40% stocks / 60% bonds on average, and never more than 60% stocks at any time.
TSP Folio is updated every business day with the latest TSP fund prices, and calculates the model portfolio’s current value and performance. On the last business day of every month, the strategy determines the optimal TSP fund allocations, and sends an email alert to members. Members also have access to the latest TSP fund allocations on our Portfolio Allocation page.
Members who follow the strategy then log into their personal TSP account on tsp.gov, and enter the new fund allocation percentages. The process is very simple and takes less than 5 minutes.
In order to successfully follow any investment strategy, you need to understand how it works, and why it’s likely to continue to succeed in the future. You must believe in it, and be convinced that it’s the best way for you to invest your hard-earned savings. Otherwise, you won’t stick with it in the long run.
TSP Folio uses proven investment techniques that have been used by successful investors for decades. We don’t try to predict the market—no one can. Rather, our investment model evaluates and reacts to current market conditions. To avoid severe market drops, the strategy uses a trend following indicator to determine exposure to the TSP equity funds (C, I, S Fund) during any given month. It also examines the relative strength of TSP Funds to boost allocation to those funds which are outperforming, and cut allocation to the laggards.