Question on the government Thrift Plan

[SmallCap]

I would really like some advice.

 

I am a smalltime investor who invests in interesting situations and smallcap stocks where I study them for years.

 

But I have a father in law who looks to me for his financial advice. I manage his small investment accounts for him. but here is the problem, he is a Gov Employee and his largest account is in the gov thrift program which is like a 401K, you get to chose your mix of investments.

 

the fund options are as follows

 

C - the S&P 500

S - the Russel 2000

I - a mainstream international stock index that I can't remember right now.

B - Corporate bond fund following the general index

G - Government bond fund

 

and that is it. From what I know you can't even keep it none invested or invested in cash, your money must be in a combination of those funds.

 

He has plans to retire in less then 5 years.

 

Now I hate this type of thing because I never liked investing in the "Market" I always liked investing in undervalued things that I could understand. So my question involves macro predictions about the direction of the market and I hate even saying those words. So please feel free help me out and voice your opinion on this topic and I will take every suggestion with a grain of salt.

 

I have reservations about any of the stock funds because of the incredible bull market that we have ridden on and I am finding less and less undervalued items in that market and am beginning to feel that the market as a whole is over valued. Also do the the closeness of his retirement I am worried about the volatility. So I don't like the stock funds.

 

The bond funds on the other hand, their yields are nothing even remotely exciting. and while I can't predict the movement of interest rates I don't see them dropping much more. I see them staying where they are at unexciting levels or going up which would hit the bond funds really badly. Never in my investing career have I ever disliked bond funds more then I do now.

 

So there is my quandary, where should I put his money? Please voice your opinion.

 

SmallCap

[rmitz]

It is shocking that a money market option isn't available.  Anyway, the bond funds would have to be evaluated based on the duration of the bonds; if they're all short term or intermediate, loss of capital should be limited.  If we're talking a mix or long bonds, I would probably just go with the s&p 500, unless the international fund were in some very specific areas.

[tooskinneejs]

I assume you are referring to the US Federal government's thrift savings plan.  If so, the G fund is essential a cash fund with a guaranteed rate of return of about 3 or 4 percent (it varies each year).  There is no credit risk with the G fund.

 

https://www.tsp.gov/investmentfunds/fundsheets/fundPerformance_G.shtml