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Investing Specialists

The Do-It-Yourself Thrift Savings Plan

Using index funds and ETFs, nongovernment employees can replicate most--but not all--of the TSP's spartan lineup.

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OK, so maybe there are no matching contributions. And there's no retail-fund equivalent of the "G" fund, which yields more than cash but guarantees principal stability, either.

But investors who are attracted to the simplicity and low costs of the Thrift Savings Plan for U.S. government workers--but who don't happen to work for the U.S. government--can get pretty close to putting together a TSP-like plan on their own, whether in an IRA, taxable brokerage account, or via the brokerage window at their own company retirement plans. After all, the TSP funds are almost all index-based portfolios that are easily replicated in traditional mutual fund or exchange-traded fund format. While retail investors won't be able to match the TSP offerings' ultralow expense ratios of just 0.029%, competition among index-fund and ETF providers means they can get pretty close.

The missing link, alas, is the G fund, which has no analog for investors who are investing outside of the confines of a 401(k) or other retirement plan. While stable-value funds are the closest approximation, their risks, while small, are greater than the G fund, which guarantees principal stability. And stable-value funds can only be held inside of a company retirement plan--not inside an IRA or taxable brokerage account. While the G fund looks underwhelming on a near-term basis, its attractions are apt to be more apparent in a rising-interest-rate environment.

G fund aside, here are the key building blocks for a "build-your-own" TSP plan; TSP investors who would like to model out their portfolios' exposures using online portfolio tools like the ones found on can also use the funds and ETFs listed below to stand in as proxies for their actual TSP holdings. To get as close to the TSP's skinny expense ratios as possible, I've highlighted some higher-minimum share classes, usually $10,000. Where appropriate, I've also included some worthwhile variations on the funds in the TSP lineup.

C Fund: U.S. Large-Cap Stocks
What It Tracks:The S&P 500, consisting of 500 of the largest U.S. companies

Mutual Fund Analogs (Expense Ratios):  Fidelity Spartan 500 Index Advantage (FUSVX) (0.05%),  Vanguard 500 Index Admiral (VFIAX) (0.05%)

Exchange-Traded Fund Analogs (Expense Ratios):  Vanguard S&P 500 ETF (VOO) (0.05%)

Variations:Holding an S&P 500 fund separately from a small-/mid-cap offering, as is the setup with the TSP, can make sense from a few vantage points. Employing the distinct small-/mid- and large-cap portfolios facilitates rebalancing; it also allows investors who are inclined to over- or underweight small- and mid-cap stocks, either strategically or tactically, to do so. But investors who are aiming for simplicity might instead use a total-market index fund to cover the total stock market;  Fidelity Spartan Total Market Index Advantage (FSTVX) (an expense ratio of 0.05%) and  Vanguard Total Stock Market Index Admiral (VTSAX) (a 0.05% expense ratio) are two fine conventional mutual fund options that cover the total U.S. market. On the ETF side,  Vanguard Total Stock Market ETF (VTI) (0.05% expense ratio) and  iShares Core S&P Total US Stock Market (ITOT) (0.07% in annual expenses) fit the bill.

S Fund: U.S. Small-/Mid-Cap Stocks
What It Tracks:The Dow Jones U.S. Completion Total Stock Market Index, which holds virtually every liquid U.S. stock except those in the S&P 500

Mutual Fund Analog (Expense Ratio):  Fidelity Spartan Extended Market Index Advantage (FSEVX) (0.07%)

Exchange-Traded Fund Analog (Expense Ratio):  Vanguard Extended Market ETF (VXF) (0.10%). The Fidelity fund tracks the same completion index that the S fund does and is, therefore, the most precise stand-in, whereas the Vanguard fund tracks the S&P Completion Index.

Variations: See above. Rather than employing separate funds for large caps and small-/mid-caps, investors who are aiming to simplify might consider a total-stock-market index fund to provide exposure to the entire U.S. market.

I Fund: Developed-Foreign-Markets Exposure
What It Tracks:The MSCI EAFE Index, which provides exposure to large- and mid-cap stocks domiciled in developed Europe, Asia, and Australia

Mutual Fund Analogs (Expense Ratios):  Fidelity Spartan International Index Advantage (FSIVX) (0.12%),  Vanguard Developed Markets Index Admiral (VTMGX) (0.09%). The Fidelity fund tracks the MSCI EAFE Index and, therefore, is the most precise alternative to the TSP's I fund. The Vanguard fund tracks the FTSE Developed ex North America Index; while its country exposure is nearly identical to the MSCI EAFE's, it includes South Korean stocks.

Exchange-Traded Fund Analogs (Expense Ratios):  iShares Core MSCI EAFE (IEFA) (0.12%),  Vanguard FTSE Developed Markets ETF (VEA) (0.09%). As with the traditional mutual fund pair above, the iShares fund tracks the MSCI EAFE Index, whereas the Vanguard fund tracks the FTSE Developed ex North America Index and, therefore, isn't as precise a stand-in for the TSP's I fund.

Variations: As I noted in my earlier article about the TSP, emerging markets are possibly the most significant area omitted from the plan; developing-markets stocks take up about 9% of the total world stock market, currently. Investors who would like more-encompassing foreign-stock exposure should consider  iShares Core MSCI Total International Stock (IXUS); Vanguard FTSE All-World ex-US, in either  traditional mutual fund (VFWAX) or  ETF (VEU) form; or Vanguard Total International Stock Index (the  mutual fund ticker is (VTIAX) and the  ETF is (VXUS)). All of these funds charge 0.14% in annual expenses. That's not a huge levy, but it's significantly more than the I fund charges.

F Fund: U.S. Bonds
What It Tracks: The Barclays U.S. Aggregate Bond Index, which encompasses the total investment-grade, U.S. dollar-denominated, fixed-rate bond market.

Mutual Fund Analog (Expense Ratio):  Vanguard Total Bond Market Admiral (VBTLX) (0.07%)

Exchange-Traded Fund Analogs (Expense Ratios):  Vanguard Total Bond Market ETF (BND) (0.07%),  iShares Core US Aggregate Bond (AGG) (0.08%)

Variations: It's hard to argue with the very low costs of the Barclays U.S. Aggregate index trackers named above. However, investors who want more-encompassing U.S. market exposure might consider iShares Core Total USD Bond Market (IUSB). As analyst Thomas Boccellari notes in this article, the fund includes the constituents of the Aggregate Index, as well as high-yield corporate bonds, eurodollar, U.S. dollar-denominated, and U.S.-listed emerging-markets bonds, among other bond types. The inclusion of those additional securities makes the ETF less government-bond-heavy than the Aggregate Index and, therefore, higher yielding; however, the two indexes' returns have been highly correlated over time.

G Fund: Higher-Yielding Cash Substitute
What It Tracks:The G fund invests in a nonmarketable short-term Treasury security that is issued to the TSP. It guarantees principal stability, like cash, while historically providing a yield in line with intermediate-term Treasury bonds.

Mutual Fund Analog:There are no perfect mutual fund analogs for the G fund. Cash instruments ensure principal stability but with a lower yield than the G fund offers; bond funds may offer similar yields but no guarantee of principal stability.

Exchange-Traded Fund Analog: None. (See above.)

Variations:Stable-value funds are the closest approximation to the G fund. They invest in bonds and, therefore, pay out higher yields than cash, and they enter into insurance contracts to provide principal stability. However, they're not quite as safe as true cash instruments--or the G fund--for reasons outlined in this article. And in any case, stable-value funds are not available outside of retirement plans; you can't buy one for your IRA or taxable brokerage account, for example.

Christine Benz has a position in the following securities mentioned above: VTMGX. Find out about Morningstar’s editorial policies.