How should TSP return rates be calculated? To borrow from a popular advertising solution from several years ago, you can "have it your way."
Everyone knows it is impossible to please all of the people all of the time.
The FedSmith service is free and we try to provide a site that is as useful to as many people as possible to keep the site interesting and relevant to a large group of federal employes and retirees. Generally, this philosophy has paid off as the site has grown dramatically over the past several years and the number of page views on the site and the "hit count" continues to grow each year.
Sometimes it is hard to gauge how people react to changes on our site. Here is an example.
In December 2006, we had a brainstorm. Our company is very small and our small group of volunteers works together to write, program and determine what services to provide our readers. At one of our regular meetings, we decided to start a new service. Several readers commented that it would be useful to have a feature on the site that calculated the returns for each TSP fund displaying the year-to-date (YTD) return of each fund. That sounded like a feature that would be popular. We decided to start providing the new service early in 2007.
Setting up The TSP Return Rates
We could have set up the feature in one of several ways. We decided to display the year-to-date return for each TSP fund and to provide new data each business day. In other words, every business day that the stock market is open, FedSmith would update the data to show how much each fund was worth and how much the fund had gone up or down for the year-to-date based on the latest closing price for each TSP fund. The decision was driven in large part based on my preferences because I like to track stock and fund returns on a daily basis for my personal use.
We implemented the new feature. It generated quite a few questions from readers which we tried to answer as best we could. Most of the questions focused on what the figures meant, how they were calculated, etc.
Several months ago, we noticed that the TSP was now providing YTD returns for each fund. Unlike the FedSmith site, the TSP showed the YTD results as of the end of the last month. That made sense because the TSP also provides a 12-month return for each fund and a monthly return for each fund using the same ending date.
We Got Mail!
As a result, we started getting many e-mails from readers who told us the TSP figures on the FedSmith site were confusing. The confusion was created because we were calculating the TSP YTD returns on a daily basis while the TSP folks were showing the YTD return for each fund on a monthly basis. After answering an untold number of e-mails explaining the differences between the figures, we decided it made sense to change the FedSmith site to reflect the same data as that used by the TSP. We explained the reason for the change in the daily newsletter and began to implement the change in late May.
We Got A Lot More Mail!
We thought we had a lot of e-mails explaining why our figures were different from those of the TSP. But the floodgates opened up. Many more people wrote and asked for an explanation as to why we were no longer providing the daily return rates for the TSP. Most of the e-mails were friendly, some were just curious why we made the change and some were more hostile than friendly or curious. The gist of most of the correspondence was that the author of the e-mail liked the daily rate change feature and would like us to reinstate that service.
We Found a Solution–We Hope
Keeping in mind that it is not possible to make everyone happy, here is our solution.
Part I of the Solution:
The FedSmith site now includes the YTD return of each TSP fund and it is calculated on a daily basis. You will see this information at the top of the newsletter and at the top of most of the pages on the FedSmith.com site. The YTD returns are likely to change each day depending on the performance of the stocks or bonds in trading on the previous day. The figures are rounded off by the computer program.
Part II of the Solution:
For those readers who do not like seeing the YTD returns calculated on a daily basis, we have a feature on the site that will satisfy your needs as well. In our TSP Corner, there is a chart on the right hand side of the page and it is labeled as "Daily TSP Rates". If you look closely, you will see that the YTD returns in this chart are different than the YTD return rates you will see in the TSP charts at the top of the page.
As an example, the chart used throughout the site shows the YTD return for the S fund as follows:
||Latest Closing Price: $20.84||Change in Fund Price Yesterday: -0.03||YTD Return: +11.09%|
This means that as of the close of business on June 18th, the closing price for the S fund was $20.84, down from a closing price $20.87 on Friday, June 15th. The total YTD return for this fund as of June 18th was 11.09%
The chart on the TSP corner on the right hand side of the page has different figures. It looks like this for the S Fund:
||Latest Closing Price: $20.84||Change in Fund Price Yesterday: -0.03||Monthly S Fund Return for May 2007: +4.40%||YTD Return as of May 31, 2007: +11.30%|
Viva La Difference!:
Here is how and why these figures are different.
The TSP Corner chart shows you how much the S fund returned for the Month of May (4.40%) That information is not contained in the charts at the top of each page or in the daily newsletter. The YTD return for the S fund as of the end of May was 11.30%. That figure will not change during the month of June. After July 1st, a new set of figures will go up to show the YTD return for the S fund as of June 29th (the last business day of the month).
We hope you find these changes to be useful. No doubt, some readers will not like this change and will find it confusing. We cannot satisfy all concerns but we think this solution may work out best for most of our readers.