TSP Fund Pairing Insights: Navigating Risk and Returns
31 May 2025
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Visualization for 31 May 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.
Interpretation:
When 100% of the investment is in the G Fund, the expected return is 0.3439%, with a risk of 0.0003964.
When 100% of the investment is in the C Fund, the expected return increases to 1.2847%, with a risk of 0.04717.
This example demonstrates how risk and return adjust based on fund allocation.
Key Insights for May 2025
Highest Return Mix:
100% C Fund offered the highest return.
Lowest Risk Mix:
The G Fund had the lowest risk while providing more returns than F Fund.
Returns for the C, I, and S Funds have rebounded, while their volatility levels remained largely unchanged. The S Fund’s performance improved, now matching that of the I Fund, though it continues to exhibit significantly higher volatility. Overall, volatility remained stable, with the F Fund showing the most notable change—a decrease in volatility.