Thanks for your videos Chris. I understand the intention of the L funds, how they work and what they’re comprised of. The reason I put a % of my portfolio in an L fund is because the cost per share is significantly lower than that of the C fund, and the rate of return is NOT significantly higher for the C fund compared to the L-2055 fund I choose (for 2024). I don’t like I & F either, but the lower cost of L-2055 and its rate of return makes it appeal to me. I’m almost 2 yr into retirement and am withdrawing 4% a year. My current portfolio is 20% G, 10% S, 40% C and 3O% L-2055. I chose L-2055 as it has higher % in stocks and is cheaper than L-2035, for example. I heard and understand everything you said. If there are any reasons beyond what you mentioned in this video as to why having a portion of my portfolio in an L fund is a bad idea (given my reasons for doing so) I’d love your input.
A few things. The share price is irrelevant. Completely irrelevant. It's an arbitrary division or number assigned. It is not "cheaper". Because the share price is irrelevant. A % return is a % return regardless of whether you have 100 shares at $1 each or 1 share at $100. If the fund goes up 10%, you make $10. Regardless of how the money was divided. You can do that math and see. It seems you think that if something is lower you get more of it? But if you put $200k into the C Fund, it doesn't matter if the share price is $1 or $100,000. You still only have $200,000 of it. If it goes up 10%, you make $20,000 regardless of what the share price is. Secondly, you mentioned the lower "cost" of the L2055. The cost of the funds are actually the fees that you pay each year. And the L2055 has a higher fee than the C Fund. .054% vs .048%. Not by much, but it is more costly. That is because the L Funds have the S and I in them which have higher management fees than the C Fund. Look at the fees page on the TSP site. Thirdly, the only reason the L2055 Fund is close to the C Fund is because it is mostly C Fund. It is 51% C Fund right now. The other funds inside 2055 are all dragging down the average because they are all returning LESS than the C Fund. Otherwise it would be the same as the C Fund. Fourthly, your portfolio isn't exactly what you think it is if that's how you have it allocated. I took some time to do the math. Because you are 30% L2055, you have 30% of your money spread out over G, F, C, S, and I in addition to the other G, S, and C that you already have. So you technically have: (20.16% G), (.14% F), (13.97% S), (55.34% C), and (10.40% I). That's a very complicated arrangement. You've basically created your own L2050 if you look at the L2050 allocations. I'm not trying to talk you out of your strategy. I just want you to fully understand what you're doing. You've in essence jumped through a lot of hoops with the end result not really knowing without doing a lot of math how much you have in each fund, and if you do the math, you'll find you're not that much different than just putting all the money in the L2050. But even then, you said you don't like the I and F but yet you're putting money in it. So again, this is how most people misuse the L Funds. It's very common, but you're not really getting yourself anywhere. You could do virtually the same thing just doing C and G and have lower expenses, and have a clear idea of where exactly your money is. Just my thoughts because you asked. You would probably benefit from sitting down with a financial planner since you're in retirement and withdrawing money.
@@BarfieldFinancialThank you for such a detailed response Chris. I do the math as you did to calculate the %’s for each fund within the L-2055, and then add it all up with my other funds, but for someone who isn’t good with math it would be challenging. Perhaps at some point you’ll want to do a deep dive video explaining more about cost per share and if/how it matters. We hear/read to “Buy low. Sell high.” A co-worker told me years ago to look at the cost per share and to buy it when it goes on sale. That is when I started considering share cost in determining my allocations. I’ve definitely made some bad decisions along the way but even so I’m within $30,000 of joining the TSP millionaire’s club, even with my 4% annual withdrawal last year (my 1st full year of retirement).
Great job Chris. I switched over this year and have benefited greatly!
Thanks for your videos Chris. I understand the intention of the L funds, how they work and what they’re comprised of. The reason I put a % of my portfolio in an L fund is because the cost per share is significantly lower than that of the C fund, and the rate of return is NOT significantly higher for the C fund compared to the L-2055 fund I choose (for 2024). I don’t like I & F either, but the lower cost of L-2055 and its rate of return makes it appeal to me. I’m almost 2 yr into retirement and am withdrawing 4% a year. My current portfolio is 20% G, 10% S, 40% C and 3O% L-2055. I chose L-2055 as it has higher % in stocks and is cheaper than L-2035, for example. I heard and understand everything you said. If there are any reasons beyond what you mentioned in this video as to why having a portion of my portfolio in an L fund is a bad idea (given my reasons for doing so) I’d love your input.
A few things. The share price is irrelevant. Completely irrelevant. It's an arbitrary division or number assigned. It is not "cheaper". Because the share price is irrelevant. A % return is a % return regardless of whether you have 100 shares at $1 each or 1 share at $100. If the fund goes up 10%, you make $10. Regardless of how the money was divided. You can do that math and see. It seems you think that if something is lower you get more of it? But if you put $200k into the C Fund, it doesn't matter if the share price is $1 or $100,000. You still only have $200,000 of it. If it goes up 10%, you make $20,000 regardless of what the share price is.
Secondly, you mentioned the lower "cost" of the L2055. The cost of the funds are actually the fees that you pay each year. And the L2055 has a higher fee than the C Fund. .054% vs .048%. Not by much, but it is more costly. That is because the L Funds have the S and I in them which have higher management fees than the C Fund. Look at the fees page on the TSP site.
Thirdly, the only reason the L2055 Fund is close to the C Fund is because it is mostly C Fund. It is 51% C Fund right now. The other funds inside 2055 are all dragging down the average because they are all returning LESS than the C Fund. Otherwise it would be the same as the C Fund.
Fourthly, your portfolio isn't exactly what you think it is if that's how you have it allocated. I took some time to do the math. Because you are 30% L2055, you have 30% of your money spread out over G, F, C, S, and I in addition to the other G, S, and C that you already have. So you technically have: (20.16% G), (.14% F), (13.97% S), (55.34% C), and (10.40% I). That's a very complicated arrangement. You've basically created your own L2050 if you look at the L2050 allocations.
I'm not trying to talk you out of your strategy. I just want you to fully understand what you're doing. You've in essence jumped through a lot of hoops with the end result not really knowing without doing a lot of math how much you have in each fund, and if you do the math, you'll find you're not that much different than just putting all the money in the L2050. But even then, you said you don't like the I and F but yet you're putting money in it. So again, this is how most people misuse the L Funds. It's very common, but you're not really getting yourself anywhere. You could do virtually the same thing just doing C and G and have lower expenses, and have a clear idea of where exactly your money is.
Just my thoughts because you asked. You would probably benefit from sitting down with a financial planner since you're in retirement and withdrawing money.
@@BarfieldFinancialThank you for such a detailed response Chris. I do the math as you did to calculate the %’s for each fund within the L-2055, and then add it all up with my other funds, but for someone who isn’t good with math it would be challenging. Perhaps at some point you’ll want to do a deep dive video explaining more about cost per share and if/how it matters. We hear/read to “Buy low. Sell high.” A co-worker told me years ago to look at the cost per share and to buy it when it goes on sale. That is when I started considering share cost in determining my allocations. I’ve definitely made some bad decisions along the way but even so I’m within $30,000 of joining the TSP millionaire’s club, even with my 4% annual withdrawal last year (my 1st full year of retirement).