TSP thrift savings plan
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TSP thrift savings plan


TSP Income L Fund

The TSP website describes the basic initial portfolio structure of their Income L Fund. This is their most conservative L Fund and is currently targeted to those TSP'ers who are expecting to start drawing down their accounts on or before 2008.

The mix is heavily weighted to the more conservative, less volatile bond funds with 74% currently devoted to the safe-harbor G Fund (government securities). This portfolio closely matches the more typical "20/80" mix lifestyle portfolios available for other very conservative 401k plan investors. The Income L Fund is TSP's most defensive portfolio that might be useful for those investors who either expect a bear market ahead or are very risk averse.

Performance

TABLE XXI
 TSP Pilot Portfolio vs. TSP L Funds, Timed and Un-timed (1989 - 2007)*
Portfolio Annualized Return
(AR)5		 Maximum Draw-down
(Mdd)1		 Ulcer Performance Index
(UPI)2		 Ulcer Index
(UI)3		 Standard Deviation
(SD)4
TSP Income Fund 7.4% -4.2% 1.7 0.9 1.0
Timed Income Fund 8.0% -3.4% 2.3 0.8 0.9
TSP 2010 Fund 8.9% -19.4% 0.7 4.4 1.9
Timed 2010 Fund 10.7% -6.4% 3.7 1.4 1.4
TSP 2020 Fund 9.8% -29.0% 0.6 7.2 2.5
Timed 2020 Fund 12.4% -11.5% 3.1 2.2 2.0
TSP 2030 Fund 10.2% -35.1% 0.5 9.4 2.9
Timed 2030 Fund 12.5% -10.4% 3.5 2.1 1.8
TSP 2040 Fund 10.4% -40.9% 0.5 11.5 3.3
Timed 2040 Fund 14.2% -16.9% 3.1 3.4 2.6
TSP PILOT Standard PORTFOLIO 18.4% -8.0% 6.0 2.1 2.2
Note: Look for a low UI and Mdd and a high Return and UPI as keys to best performance.
Note: Since the TSP L Funds were introduced in 2005, L Fund proxies were used for prior years.
* Database begins 9/1/1988. Some periods based on proxy funds and indexes.
Also see information on our Pilot Aggressive Portfolio.

Over the last 19 years this bond-heavy portfolio provided the lowest annual return of all five of the L Funds producing some 7.4% annualized while accepting a very low market exposure risk, as measured by the Ulcer Index (UI), of only 0.9 and maximum draw down (Mdd) of only -4.2% The idea is to maximize the annual return and UPI while minimizing the market risk (UI). This portfolio at least succeeded in limiting the exposure risk.

The risk adjusted performance, or the amount of return considering the risk assumed, is measured by the Ulcer Performance Index (UPI) at 1.7. The UPI for the L Income Fund is the highest of any of the new L Funds primarily because it's heavy bond portfolio suffered less loss during the 2000-2003 bear market.

The risk accepted by the Income L Fund was only slightly higher that for the TSP Pilot Portfolio which dramatically outperformed it 3 to 1.

However, the basic timed Income L Fund avoided most of the 2000-2003 bear market improving both performance and risk limitation results over the standard Income L Fund. However, the results of the basic timed L Fund do not show a dramatic improvement over the standard buy-and-hold Income L Fund because it had only a minimal stock fund exposure during the 2000-2003 bear market.

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TSP Pilot is a commercial service not associated in any way with the U.S. Federal government. TSP Pilot does not issue individual investment advice. TSP Pilot publications are prepared for informational and educational purposes only. Past stated hypothetical performance is not an indication of future performance.

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Germantown | MD | 20876 | support@tsppilot.com