The G Fund is put resources into momentary U.S. Depository protections uncommonly gave to the TSP. The federal government of the United States guarantees principal and interest repayment. There is no “credit risk” as a result. The Board’s investment in the G Fund is risk-free and can be redeemed on any business day, despite the fact that the securities in the fund pay a long-term interest rate. G Fund securities do not change in value. The only change is the interest rate.
The G Fund Yield Advantage: Short-term securities earn a long-term rate when the G Fund rate is calculated. G Fund securities typically earn a higher rate of return than short-term marketable Treasury securities due to the fact that long-term interest rates typically exceed short-term interest rates. The G Fund rate is calculated by the U.S. Treasury as the weighted average yield of approximately 183 U.S. Treasury securities on the last day of the previous month.
- The G Fund offers the opportunity to earn rates of interest similar to those of U.S. government notes and bonds but without any risk of loss of principal and very little volatility of earnings.
- The investment objective of the G Fund is to ensure preservation of capital and generate returns above those of short-term U.S. Treasury securities.
- The G Fund is invested in short-term U.S. Treasury securities specially issued to the TSP. Payment of principal and interest is guaranteed by the U.S. government. Thus, there is no “credit risk.”
- The interest rate resets monthly and is based on the weighted average yield of all outstanding Treasury notes and bonds with 4 or more years to maturity.
- Earnings consist entirely of interest income on the securities.
- Over long periods of time, the G Fund has historically outperformed inflation and has generated returns higher than those of investments in short-term Treasury securities, although past performance is no guarantee of future results.
G Fund Frequently Asked Questions
1) Why should I invest in the G Fund?
A) The payment of G Fund principal and interest is guaranteed by the U.S. Government. This means that the U.S. Government will always make the required payments.
2) Am I ok with market and inflation risk?
A) The G Fund is subject to the possibility that your investment will not grow enough to offset the reduction in purchasing power that results from inflation.
3) How can I use the G Fund in my TSP?
A) Consider investing in the G Fund if you would like to have all or a portion of your TSP account completely protected from loss. If you choose to invest in the G Fund, you are placing a higher priority on the stability and preservation of your money than on the opportunity to potentially achieve greater long-term growth in your account through investment in the other TSP funds.