Your Guide to Investing from a TSP Millionaire

Your Guide to Investing from a TSP Millionaire

For all federal employees, knowing how and when to invest into TSP seems to be a mystery. Therefore, we’ve decided to compile an all-inclusive guide and expert advice from one man who managed to become a millionaire from his own investment. After following this advice, we hope you can put yourself in a position to enjoy a healthy retirement.

Strategy – First things first, he suggests the importance of a strategy not only with your TSP but in other areas of life too. For example, he recognized that the payments for a new car continued long after the new car smell, so he set the target of reaching 300,000 miles in a car before replacing it. Rather than paying huge amounts of money each month, he re-routed this straight into his TSP.

In a career with the federal government, he soon realized the importance of starting early as well as researching the finance world. Although finances may seem a little boring at first, we highly recommend spending some time learning about investing too because you can learn how to be comfortable in the years ahead.

Towards the beginning of the 1990s, he started to invest in stock mutual funds because he recognized the long-term benefits despite the short-term declines. Over time, he bought magazines and studied all the information available. As his knowledge improved, he started to assess the most profitable markets and where his money would be best positioned. From these humble beginnings and not really knowing where to start, he earned over one million dollars by the time he retired. No matter how late you think it is or how much you think you’ll have to contribute, you can take advantage of the TSP calculator online and work out a plan that allows you to reach your goal by retirement.

Biggest Mistake – In this day and age, the biggest mistake people make is thinking that their goal is unattainable. With this mindset, it definitely won’t be attainable because you aren’t even trying. Even if mathematics is your weakest subject of all, the only thing you need to understand is compound interest; the longer you leave your money to accumulate, the more money you have at the end. Just as in many other areas of life, you need to consider the three D’s; determination, discipline, and direction.

Key Lessons – Using lessons from the millionaire and various experts, we first suggest developing a plan before then sticking to this in the long-term. Since both stocks and bonds experience short-term dips, they will recover in the long-term, so it doesn’t pay to be hasty. This being said, you should be willing to create a portfolio of both stocks and bonds, and this combination is called ‘asset allocation’. As your circumstances in life change, you should look to increase/decrease your tolerance of risk accordingly.

After investing, drop the ‘investment news’ apps and just forget about the market for a while. Considering you’re in it for the long haul, there’s no need to panic just because the experts are telling you to withdraw. While short-term investors will follow the advice, you need to keep your head and trust the cyclical nature will turn things your way before withdrawing years down the line.

In fact, you should actually look to extend your portfolio when the prices are low because you aren’t looking for a short-term profit. With the prices down in the gutter, you benefit when they start to increase once again. Over time, you should combine large company US stocks with foreign stocks and US bonds. With a TSP, you’re allowed this sort of freedom, and you can keep adjusting the proportions as the years go by.

If you feel as though your TSP is in a strong position, you can also look into the idea of investing outside of the TSP. For example, some holdings are not available within the TSP including foreign bonds, international small company stocks, and emerging market stocks and bonds. If you’re looking for something really different, you can even move into commercial properties with Real Estate Investment Trust (REIT) shares.

Finally, we also suggest keeping your eye on actively-managed funds because you will come across some experienced managers who look after some diamonds. Rather than just looking towards those at the top of the market, look for the managers who exceed expectations year after year. If a manager has delivered outsized returns over a fifteen year period, it shows that they’ve worked in the highs and lows of the market and still managed to return well. Furthermore, another interesting factor is how important their services are to the fund. If they have a large stake in the fund themselves, they’ll want to see it perform long into the future.

Summary – No matter how far you are into your career, there is no greater time to invest in your retirement than right now. Even if you need the support of a finance manager, there’s nothing wrong with receiving a little help. If you take advantage of the TSP calculator today, you can calculate how much you need to invest to reach your goal!

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