Should You Own the I Fund?

October 01, 2025

Most feds are naturally U.S.-heavy via C and S.

That works when the dollar is strong and U.S. mega‑cap tech leads.

But when international value, small caps, or a weaker dollar take the wheel, an I Fund sleeve can add return potential and reduce reliance on a single market.

The key is sizing it to time horizon, risk tolerance, and cash runway.

What the I Fund Holds

  • Benchmark: MSCI ACWI IMI ex USA excluding China & Hong Kong (developed + most emerging + small caps).

  • Sector tilt vs. U.S.: More financials/industrials but less mega‑cap U.S. tech.

  • Currency: Unhedged — returns reflect foreign stocks plus USD moves.

  • Costs: TSP’s expenses are extremely low so allocation choice matters more than fees.

When the I Fund Helps

  1. Broader growth engines — captures regions/sectors that lead when value and small caps re‑rate.

  2. Real diversification — U.S. and non‑U.S. stocks don’t move in lockstep. This helps during U.S.‑specific shocks.

  3. Dollar weakness tailwind — a falling dollar lifts unhedged foreign returns in USD.

  4. Emerging markets access — adds EM exposure while omitting China/HK by design.

When Home Bias Wins

  1. Strong‑dollar regimes — currency headwinds can overwhelm local‑market gains.

  2. U.S. leadership streaks — long runs of U.S. quality/tech dominance make international allocations look sluggish.

  3. Simplicity & sleep‑at‑night — if FX swings stress you, a U.S.‑tilted mix with G/F ballast may be better.

Wrap-Up

Keep the I Fund sized to your horizon and behavior. Use tolerance bands, refill your cash/G–F runway first, and let your policy (not headlines) drive changes.

Best,
FWR