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For example, when the L 2050 fund was introduced in January 2011, its asset allocation was 10.5% bonds and 89.5% stocks. It can be quite aggressive for funds with a distant horizon. TSP investors who are considering an L Fund should carefully examine the fund's target asset allocation.

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How to use the L 2050 Fund in a TSP account With an extremely low annual expense ratio of 0.042%, the L 2050 Fund helps to keep more of your money working for you. and international stocks and bonds, to help spread out risk. The underlying funds invest in thousands of U.S. Rebalancing a portfolio too frequently can lead to slightly inferior investment returns.īy being invested in all five individual TSP funds, the L 2050 Fund is broadly diversified. Some investors and financial advisors would consider this to be too frequent, preferring instead to “let their winners ride” and let their allocation drift a little before rebalancing. The L Funds are rebalanced to their target allocations every business day. The L Funds can have periods of gains and losses, just as the individual TSP investment funds do. Risks and Potential Rewards of Investing in the L 2050 FundĪn investment in the L 2050 Fund is subject to the investment risks associated with the G, F, C, S, and I funds. The TSP L 2050 Fund can be compared to a Vanguard Target Retirement Fund, such as the Vanguard Target Retirement 2050 Fund. Target retirement date funds are becoming more popular investment options. The worst drawdown since inception was -29.2%: The chart below shows the historical drawdowns for the TSP L 2050 Fund. An initial investment of $1,000 on would be worth $2,934 today: As of, the fund has a compound annual growth rate of 9.0%, annualized standard deviation of 14.4%, and Sharpe Ratio of 0.53. The charts below show the historical performance and risk of investing in the TSP L 2050 Fund. The fund managers assume that to pursue a potentially higher return, investors are willing to tolerate more risk (investment volatility) while they are still many years away from their planned retirement date. When the L 2050 Fund reaches its target date, its allocation will be the same as the allocation of the L Income Fund: 72% G, 6% F, 11% C, 3% S, and 8% I Fund. The goal is to strike a good balance between expected risks and returns, and to gradually decrease the allocation to the riskier TSP funds (such as the stock funds) as the fund's target date approaches. Its target asset allocation is adjusted every quarter. Like the other Lifecycle Funds, the TSP L 2050 Fund is an investment mix of the TSP G, F, C, S, and I Fund. The L Funds are essentially a diversified investment portfolio of stocks and bonds in a single fund.

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