The final returns are in. All of the Thrift Savings Plan funds provided a positive return in 2009. That is the good news that will cheer everyone up.
The big winner was the S fund. Small companies often turn around quicker during an economic recovery and last year was no exception. The S fund had a return of 34.85% for the year. (For example, when the economy was recovering in 2003, the S fund was also the big winner with a return of almost 43%.)
The I fund came in second with a return of 30.04% and the C fund returned 26.68%. The F and G funds also had positive returns with the F fund providing investors with a 5.99% return and the G fund returning 2.97%.
But, to put the return in perspective, keep in mind that in 2008, most of the TSP funds lost money. The S fund was down 38.32% in 2008; the I fund down 42.43%; and the C fund was down 36.99%.
The S fund was also the big winner for the month of December with a return of 6.57%.
Here is a graphic depiction of the underlying TSP fund returns for December and all of 2009.
A Perspective On Your Investments
While all of us are unhappy when we see our investments go down, the 2009 results will make most people feel better. But, as a long-term investor, you may want to put your investments into perspective and to realistically evaluate your financial performance as your future retirement may depend on how well your investments perform.
Here is the bad news. To capture the moment, here is a quote from the Wall Street Journal this week: "In nearly 200 years of recorded stock-market history, no calendar decade has seen such a dismal performance as the 2000s."
So, how bad can it be? If you take inflation into account, the actual returns are even worse. The C fund is based on the S&) 500 index. "Since the end of 1999, the Standard & Poor’s 500-stock index has lost an average of 3.3% a year on an inflation-adjusted basis…."
The first decade of the new century has not been a good one for stock investors. There are many reasons including the bursting of the tech bubble; the terrorist attacks in 2001, and the housing market and bank failures in 2008.
For example, the C fund had losses of about 9% in 2000, 12% in 2001 and 22% in 2002. There were significant gains from 2003-2007 but the economic problems of 2008 produced a loss in the C fund of almost 37%.
Those investors that also had money in the G and F bond funds are ahead as these funds did not have a negative year during the entire decade. (See the Average Annual TSP Returns on the FedSmith site)
What Lesson Will You Learn From This Decade?
Investors will approach this information from different perspectives. For most readers, the lesson that may come through is the advantage of diversifying your investments. Those with money in the bond funds as well as stock funds did better overall than those that may have put all of their money into one fund. Others tried to predict the direction of the market and jumped into our out of funds such as the G fund or the I fund. If they guessed correctly, and took the risk of predicting future market movements, some of these folks will have gained substantially.
For all investors, the beginning of a new year is a good time to review your investments and rebalance your funds so that you have the diversification you think is the best for your current situation.
For all TSP investors, congratulations on a successful year. And, of course, all of us certainly hope the next 10 years is kinder to investors than the last 10 have been.