As America’s economy continues to get better, the stock funds are continuing to show a positive return. For eleven out of the past twelve months, the S fund, I fund and C fund in the Thrift Savings Plan have made money for investors. (See our TSP charts for specific information on each fund for recent and historical information.) (Please note we cannot update daily rates unless the TSP provides the information and there are days when it is not available.)
Not surprisingly, the overall returns for these three returns are outstanding for the past twelve months. The S fund is up 58.27% for the past 12 months; the I fund is up 52.67% for the same time period; and the C fund is up 38.31% in the past twelve months.
For the month of February, the excellent returns continued. The I fund finished on top with a return of 2.22%; the S fund made 1.78% for investors; and the C fund had a positive return of 1.35%.
During the past twelve months, the F fund has returned 4.52% and the G fund is up 4.13%.
Obviously, those investors with their retirement funds in the TSP stocks are feeling richer than they did a couple of years ago.
One reader wrote to FedSmith.com recently asking if he should put all of his money into the S fund since it has been doing so well.
Our answer: it’s your money so do what you think is right. But investing in a fund after such a torrid pace is often not an indicator of future returns. In fact, it is often a time to take a look at your fund allocation and consider restructuring your investment portfolio.
It is unusual for a group of stocks (such as the S fund) to have a rate of 58% for two years in a row. And, if you take the time to read many financial reports and recommendations, you will find a number of advisors advising investors to consider locking in some of their gains and reallocating money into other investments. In other words, there is a possibility of future gains but the risk gets greater as the price of stocks gets higher.
A more conservative approach is to arrive at a plan for distributing your investments and make sure you stay within that distribution.
On the other hand, another reader wrote in and asked if she should sell all of her stock fund investments and put it all into the G fund.
If you think the stock market is going to go down in the near future, this is a good move to make. Unfortunately, no one can accurately predict short term market moves. So, while there has been a considerable move up in stocks, there is no certainty that stock growth will stop. Pulling all of your money out of stocks and putting it into more conservative bond funds could be a big mistake if stocks go up another 10-15% over the next few months.
So our advice is the same for both readers’ questions. Don’t try to time the market. Professional investors can’t do it successfully over time and it is unlikely you will be able to. You are likely to sleep better and your retirement will be more secure by spreading your investments over several types of TSP funds and continuing to invest more of your paycheck each month.