Checked Your TSP Funds? What Happened on May 6?

By on May 7, 2010 in Current Events with 1 Comment

It’s a safe bet that readers with money in the Thrift Savings Plan (TSP) don’t spend most of the day watching the minute-by-minute fluctuations of the stock market. Unless you are retired, or don’t have a very challenging job, spending your days watching stock prices probably is not a good career move anyway.

But a number of readers do check out how their TSP funds did the previous day and probably wonder if they are closer to retirement as they calculate the value of their TSP investments.(You can track the daily rates for all TSP funds in the TSP Corner.)

We post the latest figures at the top of our front page each day for all of the TSP funds. So, if you get your morning newsletter and check out how your TSP investments did yesterday, you may be surprised to see the following results from just one day of trading:

    I Fund: Down .56

    S Fund: Down .66

    C Fund: Down .45

    F Fund: Up .06

    G Fund: Up .0012

You won’t find many instances where your TSP funds change that much in one day. So, if you were not paying attention to the stock market on May 6, you are undoubtedly wondering: "What happened?"

The stock market plunged in a five-minute selloff that appeared to be triggered by a breakdown of trading systems. After dropping nearly 1,000 points, the market rebounded but it still closed down 3.2%. In fact, the stock market experienced the biggest intraday trading drop in history.

Some stocks lost 100% of their value in the five minute drop before moving back up again.

Here is how the Wall Street Journal summarized the event: "The Securities and Exchange Commission and the Commodity Futures Trading Commission said they were working with other regulators to review ‘unusual trading activity.’ The major U.S. stock exchanges said they were looking for trading glitches and examining potentially erroneous trades in multiple stocks. Major exchanges said they will cancel erroneous trades that occurred during the selloff."

In short, no one is certain what caused the volatility. No doubt, concern about the riots, government debt and the future of Greece contributed to the overall jitters in the stock market.

The correction in the stock market has brought the market down about 9% in the past few days. That is not unusual after the large gains in stocks in recent months and a number of analysts had predicted a drop as part of the normal stock market trading. The temporary plunge may turn out to be due to an anomaly in the software used by firms that engage in heavy trading activity.

The harrowing stock market activity resulted in gains for the F and G funds as the value of stocks fell.

Chances are, the market will recover the losses but the event has left many people nervous and shows how jittery stock traders are about the possibility of bad news and the fragility of credit and banking systems in Europe and the U.S. carrying the danger of driving down stock prices after the huge gains in recent months.

Investing in stocks is not like having a certificate of deposit at a bank. There can be rapid fluctuations in the value of your investments. It isn’t often though that you will see new historic records being set for rapid increases or drops in the stock market. Trying to predict when these drops will occur probably is not possible as yesterday’s activity indicates. Chances are, some readers will look at yesterday’s big drop as a chance to invest in stocks at a lower price. Others will see greater danger in their future retirement income and invest more of their money in the lifecycle funds of the TSP to cushion the danger inherent in a fluctuating stock market.

For all TSP investors, you can try consoling your jittery nerves by knowing that you experienced an historic day in the history of the stock market as a result of the trading activity on May 6th.

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters onĀ federal human resources.

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