Investing for retirement requires vigilance
- By Milt x_Zall
- Jun 02, 2000
Your investment decisions and how well you monitor them will help determine
whether your retirement years are golden or stressful.
The ultimate size of your government Thrift Savings Plan and private
investment account depends on your investment decisions. The most frequent
mistake investors make is to carefully select the makeup of their TSP and
private investment account and then expect it to perform as if it were on
Don't make that mistake. You're the pilot and you have to constantly
monitor the performance of your investments. That means checking each investment's
performance quarterly and comparing it to its peers.
One bad quarter does not mean an investment has gone sour. If your fund
has a bad quarter, there may be a valid reason. Do your best to find out
why. If your fund has another bad quarter, there is reason to believe that
you are seeing a deteriorating trend. If you're not satisfied with the information
you get from the fund manager, it may be time to switch.
Before switching, make sure you compare apples to apples. Not all investment
funds are alike. There are many fund categories and each employs a specific
investment approach. The financial press publishes indexes for each fund
category. To see how your fund is doing, compare its performance against
the appropriate index. If you're not sure what category your fund belongs
in, contact the fund.
Another condition that calls for reconfiguring your TSP and private
investment account is if it is "out of balance." For example, if you've
decided to place 20 percent of your TSP and private investment plan portfolio
in corporate bonds, check the value of the bond component of your portfolio
each year. If the percentage moves up or down, make an adjustment.
If you find that the value of your account fluctuates more than you
are comfortable with, you may want to adjust asset allocation. You want
a nice retirement account balance when you retire, but it's also important
to be able to enjoy watching it grow and not letting it keep you up at night.
You may need to periodically adjust the makeup of your TSP and private
investment portfolio to reflect changing economic conditions. For example,
large cap stocks such as those found in the S&P 500 are in vogue right
now. But in five years, that could change. You should keep your account's
makeup flexible and adjust it as conditions warrant.
— Zall, Bureaucratus columnist and a retired federal employee, is a freelance
writer based in Silver Spring, Md. He specializes in taxes, investing, business
and government workplace issues. He is a certified internal auditor and
a registered investment adviser.