TSP Fund Pairing Insights: Navigating Risk and Returns
28 February 2025
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Visualization for 28 February 2025
This actual visualization illustrates the trade-off between risk and return for different TSP fund mixes based on three years of monthly data.
How to Read the Chart
X-Axis:
Represents the “risk” of the particular mix, measured by statistical covariance over the last three years of monthly data. Left to right: From less variable (lower risk) to more variable (higher risk).
Y-Axis:
Represents the statistical “expected monthly return” of the particular mix, measured by the mean of the last three years of monthly data. Bottom to top: From lower returns to higher returns.
Legend:
Each line represents a specific fund mix (e.g., G and F Fund). The line shows how the risk and return evolve as the mix transitions from 100% of one fund to 100% of the other in 5% increments.
Example Interpretation
For instance, the blue line represents a mix of the G Fund and C Fund.
When 100% of the investment is in the G Fund, the expected return is 0.3424%, with a risk of 0.0004107.
When 100% of the investment is in the C Fund, the expected return increases to 1.402%, with a risk of 0.04682.
This example demonstrates how risk and return adjust based on fund allocation.
Key Insights for February 2025
Highest Return Mix:
100% C Fund offered the highest return.
Lowest Risk Mix:
The G Fund had the lowest risk.
Generally, volatility remained the same and expected returns decreased.