TSP F Fund: Quick Guide

The F Fund provides exposure to the U.S. bond market, offering higher potential returns than the G Fund with moderate risk. It tracks the Bloomberg Barclays U.S. Aggregate Bond Index, investing in government, corporate, and mortgage-backed bonds to provide income and some capital appreciation while diversifying equity holdings.

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Table of Contents

• Introduction

• TSP F Fund Key Features

• Historical Performance

• Risk Profile

• Ideal Investor Profile

• Advantages and Limitations

• Strategic Considerations

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Introduction

The F Fund (Fixed Income Index Investment Fund) offers federal employees exposure to a diversified portfolio of bonds and other fixed-income securities. Unlike the G Fund, the F Fund's value fluctuates with market conditions, but it historically has provided higher returns over the long term while still maintaining relatively low volatility compared to equity funds.

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TSP F Fund Key Features

Feature	Description
Investment Type	Fixed income securities tracking the Bloomberg Barclays U.S. Aggregate Bond Index
Risk Level	Low to moderate
Volatility	Low to moderate (May experience price fluctuations)
Inflation Protection	Moderate
Income Generation	Regular interest income plus potential capital appreciation
Principal Protection	Partial - Subject to interest rate and credit risk
Minimum Investment	None (Can allocate any percentage of TSP balance)
Management Expense Ratio	0.058% (2023) - Significantly lower than similar private-sector funds

Historical Performance

Time Period	Average Annual Return
1-Year (2023)	5.36%
3-Year (2021-2023)	-2.65%
5-Year (2019-2023)	0.65%
10-Year (2014-2023)	1.51%
Since Inception (1988)	Approximately 5.7%

Source: TSP Fund Performance

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Risk Profile

The F Fund carries several types of risk:

• Interest rate risk: Bond prices fall when interest rates rise

• Credit risk: Possibility of default by bond issuers

• Prepayment risk: From mortgage-backed securities when homeowners refinance

• Inflation risk: Fixed income returns may not keep pace with inflation

• Market risk: Subject to bond market fluctuations

While riskier than the G Fund, the F Fund is significantly less volatile than equity funds (C, S, and I Funds).

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Ideal Investor Profile

The F Fund may be appropriate for:

• Balanced investors: Those seeking higher returns than the G Fund with moderate risk

• Mid-career employees: Investors with 5-15 years until retirement

• Income-focused investors: Those prioritizing regular income generation

• Diversification seekers: Those looking to balance equity exposure

• Defensive positioning: Investors concerned about equity market corrections

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Advantages and Limitations

Advantages

• Enhanced returns: Historically outperforms the G Fund over longer periods

• Income generation: Provides regular interest payments

• Diversification: Often moves differently than stocks, providing portfolio stability

• Professional management: Tracks a widely-respected bond market index

• Low expenses: Much cheaper than comparable private-sector bond funds

Limitations

• Interest rate sensitivity: Value decreases when interest rates rise

• Default risk: Though minimal due to diversification, still possible

• Inflation challenges: May struggle to maintain purchasing power during high inflation

• Taxation of interest: Interest is taxable in non-tax-advantaged accounts (not applicable to TSP)

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Strategic Considerations

Consider these strategic approaches for incorporating the F Fund in your TSP allocation:

1. Balancing act: Use the F Fund to moderate the volatility of equity investments

2. Rising rate strategy: Reduce F Fund allocation during rising interest rate environments

3. Glide path adjustment: Gradually increase F Fund allocation as retirement approaches

4. Duration management: Understand that the F Fund's average duration (approximately 6 years) makes it sensitive to interest rate changes

For more personalized guidance, consider using the tools available on the TSP website or consulting with a financial advisor familiar with federal benefits.

For detailed information about index composition and methodologies, visit Bloomberg Indices.

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This guide is intended for educational purposes only and does not constitute financial, legal, or tax advice. Federal employees should consult with qualified professionals regarding their specific circumstances.