More Investment Options: Good/Bad?

Would you like to be able to invest in gold, real estate or a particular part of the world via your Thrift Savings Plan?

The answer for many people is yes, they would at least like the option.

Feds eager to broaden their investment options by putting some of their TSP funds into regular mutual funds — like Schwab, Vanguard, Fidelity, T.R. Rowe Price, etc. — might want to think twice about it.

All of those funds are top-rated, have a good track record and are well managed.

They, and others like them, offer many more specialized investment options that the broad-based C, S, I and F funds which are indexed to the stock or bond market.

Legislation is pending in Congress (H.R. 1256) that would open a ‘window’ when people could move some of their TSP nestegg to outside mutual funds.

The pros are obvious.

People who want to invest in or bet on sector funds with tax-deferred money could do so.

Several readers in the past have told FederalNewsRadio that the investments they would have made but couldn’t did better than the options offered by the TSP.

If the investment window is opened, people who believe that Bolivia or Mongolia or Michigan are the wave of the future, could invest in funds that specialize in those parts of the world.

Or put some of their retirement investment funds into precious metals.

Or the dot.com business or real estate REITs.

If they guess correctly they could come out with bigger returns than folks who stick with the broader index-funds.

Or not.

The cons are not so obvious, but they are there.

Congress setup the TSP the way in the belief that most people would be better off with broad diversified funds — like the C and S funds which cover almost the total U.S. stock market.

While those index funds have taken a big hit, some experts say it would have been worse for people who had all their nest eggs in sector funds.

There is also the question of fees.

The TSP has the lowest mutual fund administrative fees in the business.

People who chose a mutual fund that charges 1.5 or 2 percent (or more) would have to ‘make’ that much in their investment before they broke even.

The fund gets its fee whether it wins or loses.

Finally, there is the issue of political correctness.

What if somebody objected to a fund that specializes in whale products? Or one involved with industries hell bent on cutting down the Amazon rain forests? What if Congress required the TSP management to vet each and every fund. How would that work, what would it cost, who would decide and who would pay?

Being a career columnist, I had all the answers to all of the above when I started this thing.

But, darn it, they’ve slipped my mind.

I do recall that my solutions were brilliant in their simplicity. But that’s about it. They are gone at least for now.

A little help, please: mcausey@federalnewsradio.com

FERS Sick Leave Update

Lots of request from FERS folks for an update on the bill that would give them retirement time credit for unused sick leave.

The pro-fed proposal is part of a much larger bill, the Tobacco bill, that has passed the House and now must go through the Senate.

Here what it looks like.

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