next up in the series of tsp Investments today we're going to talk about the F fund probably one of the more misunderstood funds that we have we're also going to talk about what an index is because we need to know that for today's fund and for the csni we're going to be talking about how to replicate those in the private sector and that requires the understanding of an index fund so stick around we'll talk about the fund welcome back foni we're going to continue our series of tsp investment funds explaining exactly what they are so that helps you decide what you want to invest in yes I'm back in my office back from SE Island had a great week down there I consider this a temporary exile until I can get back in a place that is more befitting of a man of my stature anyway moving on talking about the f fund if you missed the first Fund in the series that was the G fund you can click on that link right there and take you to a video that explains the G fund today we're going to move on to the next more risky fund the G is the most conservative and then the F would be second as far as conservative so slightly more risky and explain exactly what this is the F fund is the second oldest tsp fund started on January 29th of 1988 same day that the C fund actually started which will be our next video since then the F fund has averaged a little over 5% a year over that time period so more than the G fund if you remember that from uh that video it was around 4.6% over the life of the G the the f is a little bit higher 5.27% I believe exactly um it does fluctuate it goes up and down most years it's up however unlike the G it is not guaranteed not to lose money and in some years it it has lost money uh last year it made about a little over 5% so kind of the average but the year prior to that in 2022 it lost 12% which was a record for it uh the year before that it lost a little over 1% so a couple of losing years in a row so not exactly the same as the G in the sense that it's never going to go down it will in some years go down bonds are highly interest rate sensitive so the as interest rates go up bond prices go down and the reverse is also true so if you'll remember in 2021 obviously we had a lot of uh inflation starting in 2021 continuing into 2022 as a result of government uh injecting money into the economy recovering from covid all that kind of stuff so as interest rates went up the F fund bond prices went down the F fund is comprised of bonds it went down because the interest rates went up so much so fast the F fund took a pretty big hit that year in 2022 now that interest rates are somewhat stabilized and there is a lot of talk about them coming down you start to see the F fund moving up a little bit so if you're investing in the F fund what exactly are you purchasing what are you putting your money in it's bonds like we said but unlike the G fund which is strictly a very unique type of bond US Government treasuries the fund is investing in bonds that are available out in the private sector some of them may be government bonds federal state or local you may have heard the term municipal bonds that would be part of the F fund matter of fact it'd be a pretty large part of the F fund over 40% invest in some sort of government bonds but in addition to that you have highgrade corporate and other types of bonds so the bonds inside the F fund would be high-grade bonds these aren't junk bonds these aren't high yield bonds these aren't uh extremely risky bonds we're going to talk about the index that the F fund is based on here in a minute but in the index that replicates the F fund that's based on there's about 13,000 Bonds in there so this is not like they bought 10 or 12 bonds the risk is spread out over literally thousands of bonds and that's that's the composition of the F fund so if you're investing in that you're investing in high quality bonds before we go much further we need to explain exactly what an index is you hear that term a lot when with regards to Investments particularly the stock market let's say the stock market index uh all of the tsp funds with the exception of the G which we talked about is unique to the tsp it's not available in the private sector every other Fund in tsp is based on an index or tries to copy or replicate an index out in the real world so what exactly is an index what does that mean an index is simply a group or a collection or a conglomeration of different stocks or other types of Investments that are used to sort of track an overall industry or the stock market or uh just a particular sector let's give an example here that probably make this a little bit clearer to everyone the S&P 500 Index that's probably the one everyone's most familiar with when people say the market is up or the market is down they're generally talking about the S&P 500 Index so that index is literally 500 us companies it's technically like 503 but it's it's 500 us companies that are the largest or the leading companies in the United States so these would be companies that you would know so this is Amazon Home Depot Apple Tesla these are big companies instead of just picking One stock out let's say that you somebody wanted to track how the stock market was doing and so they said okay we're going to just look at Apple computer is Apple up today than the of the stock market would be up today well that doesn't make much sense if you just pick one stock to kind of represent the entire Market because Apple could have a bad day and the rest of the market could be up by the same token there's like 4,000 companies traded on the different stock exchanges so we're not also going to include all 4,000 because some of those are companies that may be going bankrupt or may have just no impact on the economy as a whole and so what people decided was 500 companies would be a good representation of the overall stock market so the S&P 500 is then those 500 leading companies somebody puts those together every day a numerical figure is is issued calculated and then that's how we track whether the market is going up or down so when you say the market is up today generally that's what we're talking about the S&P 500 Index there are are still companies that would be down even in the 500 or outside of the 500 but as a whole the market is up when those 500 companies are up that is the C fund we'll talk more about that in the next video the F fund is also based on an index so what exactly is the F fund index it's the Bloomberg us aggregate Bond index sometimes just shortened as the a now that's probably not something that you guys quote or see a lot on CNBC if you're watching financial news or something like that but that's what the f fund is based on it's it's based on that in index that is again called AG for short so the fund seeks to replicate that remember I said there was 13,000 bonds or so inside the a the fund is trying to meet that same return that the a has so if the a is up 5% in a year we would like to see the fund up 5% that's how it works so that's what the fund is based on as we get into the other videos I will explain exactly the indexes that the CES and I are based on as well but right now we're just talking about the F or the a so who is the F fund for well just like the Gund this is for somebody that's looking to preserve their wealth you're not going to make a ton of money in the fund but you probably will over time make more money than the G so this is somebody that would want to be conservative but still would like a little bit of risk or at least is willing to take on a little bit of risk in order to get a little bit better returns better returns than the G so the F fund again a little over 5% GF fund 4.6% or so obviously the f fund's a little riskier you will lose money some years as a general rule you're going to make money over time probably more than the G fund and in periods where inflation goes down which may be coming soon who knows uh then the F fund would outperform the G by a substantial amount I'm not one for timing the market anybody that's read my newsletters or whatever would know that but I'm just saying in in certain periods of time the F fund will move that's why it moves it is very interest rate sensitive so what if you're interested in uh purchasing or investing in the equivalent of the F Fund in the priv sector let's say you like the F fund but you've moved your money over to Schwab or Vanguard or something like that what exactly are the Investments that you're looking for well here's a few we'll go through first of all if you want to learn more about the F fund you can go to tsp.gov click on individual funds and go down to the F and you'll see a lot of information on there particularly here's where we are talking about the index that it tries to match the Bloomberg us aggregate Bond index a broad index representing the US bond market I didn't specifically say that but it is it's in the name it's the US Bond so we're not buying uh you know private company bonds out of Russia or China or something like that it explains a little bit more about when it started the expense ratio and the actual composition that is in the F fund like I was talking about over 40% government bonds if you want to replicate this in the private sector you've got several options Vanguard you're looking at ticker symbol vbtlx Total Bond market index regardless of what company you're going for in the private sector if you're looking for a mutual fund that duplicates the performance of the F fund what you're looking for is a mutual fund that has as its Benchmark the Bloomberg us aggregate Bond index so the fund vanguards vbt LX and then U Fidelity FX NAX they are all trying to duplicate the AG that index the Bloomberg us um aggregate Bond index so as long as the mutual fund that you're looking for you're interested in investing in as long as it has that AG as its Benchmark which you'll see down here in Fidelity it does as long as the investment you're researching has that as its Benchmark that's what it's trying to duplicate then you're essentially investing in the same thing as the f one last one I believe is ey shares if you're looking for an exchange traded fund this actually has as its symbol AG so you can look in that as well and it is again the underlying index is the Bloomberg us aggregate Bond index all right so that's the fund in the tsp we've covered both bond funds now G and F we're going to leave the bonds next video video we're going to go into the stocks we'll do three videos C Sni I we'll explain all those what indexes they track in case you want to replicate that in your personal accounts until next time thanks for watching please like subscribe please share this with other people I know there's a lot of people out there that don't really understand the Investments inside the tsp particularly people that just came on this is not something just for us old people this is important for younger people again a younger person probably does not want to put a whole lot of money into the gnf they probably want to stick more to the stocks because they have a longer investment Horizon timeline so they need to understand that there's a lot of people that email me and call me or whatever and tell me that they regret being in the Gund for 20 years because they didn't really understand it that's the whole purpose of this series so you guys understand exactly what the investment options are inside the tsp P people always ask me I'm 60% C 40% G should I be is that good here's what I found the more you understand the Investments and their purposes the more that decision makes itself if you fully understood the gfcs and I you would not be in the G the last 20 years of your career because you would understand what you're missing out on okay so that's the whole purpose of why I'm doing this to explain this to you guys so you can share it to others so everybody can maximize their tsp as much as possible thanks guys leave comments below let me know what you think I'll include links to these different funds here in case you want to research them yourself I'm not endorsing any of this this is an educational thing this is not me giving any type of investment advice but again the more that you learn your options the more I believe that the decision makes itself all right until next time thanks you guys take care of each other and feed your tsp [Music]