Joan,
Do you agree that the 'G' fund described below represents an attractive investment choice whose equivalent is not available from private sources or to non-government employees?
This is an option in the TSP (Thrift Saving Plan) in which up to 14% of income can be invested and the government contributes an additional 5%.
tsp.gov
What is the G Fund?
The G Fund consists exclusively of investments in short-term, nonmarketable U.S. Treasury securities specially issued to the TSP. G Fund investments earn interest at a rate that is equal, by law, to the average rate of return on outstanding U.S. Treasury marketable securities with 4 or more years to maturity. Currently, the maturities of the securities in the G Fund range from 1 day (on business days) to 4 days (over holiday weekends).
What are the advantages and risks of investing in the G Fund?
There is no credit risk (that is, risk that principal or interest will not be paid) for the Treasury securities in the G Fund. They are guaranteed by the full faith and credit of the U.S. Government.
Because of the Board's current policy of investing only in short-term securities, there is also no market risk in the G Fund. Market risk is the risk of fluctuations in the value of securities due to changes in overall market rates of interest. If you are uncomfortable with market risk, the G Fund may be the most appropriate investment fund for you. However, G Fund rates of return may well be lower than those of the other TSP funds over the long term.
As a result of the G Fund rate calculation and the Board's policy of investing exclusively in short-term securities, investors receive a longer-term rate on short-term securities and at the same time avoid the market risk associated with longer-term securities.
How has the G Fund performed?
The 1993 – 2002 rates of return for the G Fund are presented in the following table. The table also presents the rates of return for the last 10 years for G Fund-related securities, based on the monthly rates (compounded) for such securities. There is no assurance that future rates of return for the G Fund will replicate any of these rates.
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Year G Fund* Related Securities**
1993 6.14% 6.23%
1994 7.22% 7.29%
1995 7.03% 7.10%
1996 6.76% 6.80%
1997 6.77% 6.80%
1998 5.74% 5.77%
1999 5.99% 6.03%
2000 6.42% 6.42%
2001 5.39% 5.36%
2002 5.00% 4.98%
1993-2002 compound annual rate of return
6.24% 6.27%
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* These rates are stated after deducting the administrative expenses of the TSP.
** Rates of return were calculated by the Board. These figures are based on the statutory rate of return and are stated without any reduction for administrative expenses.
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Regards, Don |
