The G Fund, or Government Securities Investment Fund, in the Thrift Savings Plan is the lowest gaining, least volatile fund. It will not lose money, but it also doesn’t give much of a return either. However there are months where the G Fund out gains the other funds and is a solid option during a depressed stock market.
The G Fund money is invested in short-term U.S Treasury securities specifically issued to the TSP. The payment of the principle and interest is guaranteed by the U.S. Government. The goal of the fund is to maintain a higher return than inflation. The interest rate is set every month and is based upon a weighted average of outstanding Treasury notes and bonds that have more than four years to maturity. The earnings are entirely based upon the interest income of the security fund.
The comparison of the G Fund to the short-term marketable Treasury securities (T-Bills) is often drawn. However the G Fund earns about 1.8% more annually than the T-Bills. That is because the G Fund earns an intermediate rate, whereas the T-bills earn a short-term rate.
The administrative expenses for the fund is 2.9 basis points, or $0.29 per $1000 account balance.
The 10-Year (2005-2014) annual return was 3.19%, and since its inception in April 1987 the return is 5.43% annually. There is about $200 billion invested in the G Fund.
Both the Plus and Basic utilize the G Fund heavily during times of loss in the stock funds (C, S and I).