The Thrift Savings Plan (TSP) that is offered to all U.S. government employees is one of the simplest and most efficient retirement plans in use today. But while thousands of civilian and military employees defer a portion of their earnings into the plan each year, many participants do not understand the actual fund options available in this plan and are unsure which funds are appropriate for them. In fact, many government employees are unaware of which fund or funds they are currently invested in or why they chose them. This article breaks down the five core investment funds available in the TSP along with the Lifecycle funds and their proper use.

Core TSP Funds
The five core funds offered in the TSP loosely cover the basic range of publicly traded debt and equity securities. All five funds are managed by Blackrock Capital Advisers and are available only to TSP participants. None of them trade on any public exchange, although Blackrock does offer publicly traded equivalents of some TSP funds through iShares, its subsidiary company that offers a comprehensive range of ETFs. Four of the five funds are index funds, which hold securities that exactly match a broad market index. The money that participants place in the F and C Funds is invested in separate accounts, while the S and I Fund monies are invested in trust funds that are commingled with other tax-exempt pension and endowment funds. All of the funds, except for the G Fund, are 100% invested in their respective indexes, and they do not take into account the current or overall performance of either the specific index or the economy as a whole. Each TSP fund's share price is calculated daily and reflects investment returns minus administrative and trading costs. The five funds are broken down as follows.

Government Securities Investment Fund (G Fund)
This is the only core fund that does not invest in an index. The G Fund invests in a special nonmarketable treasury security issued specifically for the TSP by the U.S. government. This fund is the only one in the TSP that guarantees the return of the investor’s principal. It therefore has the lowest risk of the five funds, and all money contributed into the TSP is placed into this fund by default unless the participant specifies otherwise. It pays an interest rate that is calculated on the current market yield of all outstanding publicly traded treasury securities with a maturity of at least four years. The average maturity is about 11 years, and the aggregate interest rate is adjusted monthly. The G Fund has historically provided the lowest rate of return of any of the core funds. The Barclays iShares funds that match the G Fund most closely are the iShares Barclays 7-10 year T-Bond fund (ARCA:IEF) with an average maturity of 8.38 years, and the 10-20 year T-Bond fund (ARCA:TLH), which has an average maturity of 14.36 years.

Fixed Income Investment Index Fund (F Fund)
This fund represents the next step up the risk/reward ladder in the TSP. The F Fund purchases securities that exactly match the Barclays Capital U.S. Aggregate Bond Index. This index invests in a wide range of debt instruments including publicly traded treasury and government agency securities, corporate and foreign bonds, and mortgage-backed securities (MBS). This fund also pays monthly interest that typically exceeds that paid by the G Fund. However, it does not guarantee the return of the investor’s principal. The Barclays iShares equivalent ETF is the iShares Core Total U.S. Bond Market ETF (ARCA:AGG).

Common Stock Index Investment Fund (C Fund)
This fund is the most conservative of the three stock funds available in the TSP. The C Fund invests in the 500 large and mid-cap companies that comprise the Standard and Poor’s 500 Index. This fund has experienced greater volatility than either the G or F Funds - and has posted commensurately higher returns over time. The Barclays iShares equivalent ETF is the iShares Core S&P 500 (ARCA:IVV).

Small Capitalization Stock Index Fund (S Fund)
The S Fund holds the securities that comprise the Dow Jones U.S. Completion Total Stock Market Index. This index is composed of the 4,500 companies outside the Standard & Poor’s 500 Index that make up the rest of the Wilshire 5000 Index, which is the broadest of the stock indexes. As the fund name indicates, these companies are smaller and less established than the S&P 500 companies and have greater potential for growth than those in the C Fund. The S Fund is considered one of two funds with the greatest risk in the TSP. It has outperformed the C Fund with proportionately greater volatility over time. Barclays iShares has no exact S Fund equivalents. Those who wish to duplicate this fund outside the TSP could use the following four funds to cover many of the companies in the S Fund (and some that are not):

Russell Midcap ETF (ARCA:IWR)
Russell 2000 Index ETF (small caps only) (ARCA:IWM)
Russell 3000 ETF (ARCA:IWV)

International Stock Index Investment Fund (I Fund)
This fund invests in securities that mirror the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index. This is one of the broader international indexes that invests in larger, more established companies located in 22 developed countries around the world. It is regarded as the other high-risk fund in the TSP and has historically posted a higher average annual return than the C Fund. This is the only fund in the TSP that invests in companies outside the U.S. The Barclays iShares equivalent ETF is the iShares MSCI Europe, Australasia and Far East ETF (ticker symbol EFA).

Lifecycle Funds (L Funds)
The Lifecycle Funds are composite funds that invest in a combination of the five core funds and act as “target date funds” by nature. They are designed and managed by the portfolio managers at Blackrock Capital and function as "automatic pilot" funds for participants who do not wish to make their own asset allocations. They invest primarily in the stock funds when they are issued, and are then slowly reallocated by the fund managers into the two bond funds every 90 days until they mature. The fund's asset allocations include 74 percent invested in the bond funds, and the remaining 26 percent is divided between the three stock funds.

Participants should take care to match the maturity date of the L Fund they choose with the time that they actually begin receiving distributions, instead of when they merely separate from governmental service. The L funds that are now available mature in 2020, 2030, 2040 and 2050. Each is designed to provide income for those who will begin taking distributions within five years of the maturity date, and they also offer the best possible mix of growth versus reward during both the growth and income phases of each fund. The L Income Fund can be used by those who have already retired and need a conservative stream of income at the present time.

TSP Investment Programs
Although the L Funds provide one avenue of professional portfolio management for TSP participants, some privately managed TSP investment programs may provide additional clout for aggressive investors. offers several levels of market-timing strategies, and provides additional commentary and ideas. Those who seek higher returns and are willing to take on additional risk can search online for other proprietary market-timing strategies that may beat the indexes over time. Of course, many of these programs charge a quarterly or annual fee for their services, and they cannot guarantee their results.

The Bottom Line
The Thrift Savings Plan offers participants the options of growth, income and capital preservation. The annual investment expenses in this plan are among the lowest in the industry, and all of the funds are fully transparent as well. There are no hidden fees in this plan, and participants should think carefully before rolling their plan assets elsewhere when they retire. For more information on the TSP, visit

Related Articles
  1. Bonds & Fixed Income

    The Treasury And The Federal Reserve

    Find out how these two agencies create policies to stimulate the economy in tough economic times.
  2. Investing Basics

    Introduction To Growth Investing

    There are principles and techniques that are applicable for many different types of investors and growth strategies.
  3. Retirement

    Will Your Retirement Income Be Enough?

    Find out how to determine whether you're on the path to a comfortable retirement, or financial ruin.
  4. Retirement

    Preparing To Tap Into Retirement Income

    You need to plan ahead to ensure a long and happy future away from the daily grind.
  5. Retirement

    Thrift Savings Plan Helps Federal Workers Retire

    The TSP is key component of retirement savings for U.S. government workers and members of uniformed services.
  6. Markets

    Investment Valuation Ratios

    Learn about per share data, price/book value ratio, price/cash flow ratio, price/earnings ratio, price/sales ratio, dividend yield and the enterprise multiple.
  7. Savings

    7 Millionaire Myths

    Here are seven millionaire myths and realities that reveal they don’t quite have it all.
  8. Stock Analysis

    Is BP's High-Yield Dividend Safe?

    Learn how receiving a greater than 7% yield from an oil major is a rare opportunity and one that comes with a fair share of potential dangers.
  9. Stock Analysis

    4 Quick Service Restaurants for Your Portfolio

    Learn about the four quick service restaurants with attractive investment theses and growth prospects that can be valuable additions to your portfolio.
  10. Stock Analysis

    The 5 Best Dividend Stocks in the Healthcare Sector

    Learn about the top five dividend stocks of companies operating in the health care sector that generate substantial cash flows to afford high payouts.
  1. Do mutual funds invest only in stocks?

    Mutual funds invest in stocks, but certain types also invest in government and corporate bonds. Stocks are subject to the ... Read Full Answer >>
  2. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  3. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  4. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  5. What asset allocation should I use for my retirement portfolio?

    Asset allocation should be personalized to each individual investor's return objectives and risk tolerance. However, there ... Read Full Answer >>
  6. How does the risk of investing in the industrial sector compare to the broader market?

    There is increased risk when investing in the industrial sector compared to the broader market due to high debt loads and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  2. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  3. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  4. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  5. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  6. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!