- The Washington Times - Monday, May 9, 2005

Do you like the idea of owning gold? Wish you could invest on a tax-deferred basis in a socially responsible company that recycles, treasures the Earth and doesn’t do defense contracts?

If things had gone as planned, federal and military investors would have twice as many investment options in their 401(k) plan as the five funds from which they choose now.

Since the Thrift Savings Plan was set up, special interest groups and investors have pushed the Federal Retirement Thrift Investment Board to offer more choices.

When the retirement plan started, workers were limited to the G Fund, with special Treasury securities, the F Fund, which is indexed to the bond market, and the C Fund, which is a low-fee version of the popular Standard & Poors 500 index funds.

Two funds were added later. They are the higher-risk, higher-reward I Fund, an international stock index, and the S Fund, which is indexed to the 4,500 midcap and small-cap companies tracked by the Wilshire 4500 index.

But advocates of diversity in investing continue to push for more TSP options.

In the late 1990s, when the stock market was booming, many feds demanded that the TSP offer them a specialized high-tech fund that would track the information-technology market. Congress ignored the demands, and before an organized campaign could be mounted for a Nasdaq-tracker fund, the IT bubble burst.

Also in the late 1990s, when it was hard to pick a fund or stock that was not doing well, lobbyists tried to persuade Congress to authorize an M Fund based on mortgage-backed securities, as well as a different kind of G Fund, this one invested in gold certificates.

There also was some demand, but not much, from feds for a socially responsible fund that would invest only in firms that had pro-green policies. Finally, there was an effort to create an M Fund that would invest exclusively in minority-owned businesses.

All five of the proposed funds failed to become part of the TSP because of opposition from Congress, the Federal Thrift Investment Retirement Board and other groups, or because investors got cold feet when the IT industry went belly up and gold prices dropped.

At least one of the prime backers of one of the also-ran funds now is in prison for fraud.

Congress is considering a proposal to set up an R Fund, for real estate investment trusts, that would invest almost exclusively in commercial property. According to the board that runs the TSP, federal and military investors already have about $1 billion invested in REITS, which now make up about 8 percent of the total assets in the F Fund.

Coming up later this year is the federal version of the popular ?life cycle? funds. The L Fund will be a wrap-around deal, an automatic pilot, self-adjusting portfolio that will base the investor’s mix on the estimated date he will begin spending down his TSP account.

A young investor’s L Fund would contain a bigger percentage of high risk/high reward funds, like the C, S and I funds. As the employee investor ages and gets closer to using the money, the percentages of stock, bonds and Treasury securities will be adjusted accordingly.

Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132 or [email protected]

LOAD COMMENTS ()

 

Click to Read More

Click to Hide