Every single fund in the Thrift Savings Plan was up in February.
Even better: Every single fund in the Thrift Savings Plan was also up in January.
This means that, for the I fund, your investment is up 5.82% so far in 2011. The S fund is up 5.81% and the C fund is up 5.87%. The very safe, conservative G fund is also up with a return of 0.46% so far in 2011. Bonds have tanked in the open market but, even with this bubble bursting, the F fund is up 0.39% for the year.
But wait…the stock market news gets even better. The C fund is now up for six straight months. The S fund is also up for six straight months and the I fund is up for five of the last six months. Of course, the G fund is always going up–albeit at a slow rate.
It may not be coincidental but, since the market bottomed in March 2009, after which the Dow Jones Industrial Average has almost doubled, investors have been fearful and with apparently good reason for their fear. There have been concerns about deflation and inflation and concerns about the falling value of the dollar and the rising value of the Chinese yuan. Investors have also been worried about states declaring bankruptcy, cities defaulting on their supposedly super-safe municipal bonds to upheaval in the emerging markets around the world.
And, despite the turmoil and the worry, the stock market continues to move up.
Some of these worries that have hit the world happened in February. Remember the uprising in Egypt? Oil prices shot up to above $100 a barrel for crude, at least for a time. And, despite the problems, the stock market continued to go up.
How are TSP Investors Reacting?
With all of the bad news around the world, and the very favorable returns in the stock market, how are investors in the Thrift Savings Plan reacting?
In December, TSP investors transferred $322 million from the G fund and $710 million from the F fund. The also transferred $338 million from the I fund.
In January, TSP investors transferred another $694 million from the G fund and another $443 million from the F fund and another $115 million form the I fund.
At the same time, the C fund gained $162 million in December, the S fund gained $961 million and the L funds gained $247 million. In January, the C fund gained another $271 million, the S fund gained another $501 million and the L funds saw an influx of $580 million. That is a lot of dollars being moved around.
Here is how the fund transfers look for January 2011 for each fund.
Time to Party and Let The Good Times Roll?
Thanks to my new Rosetta Stone program, here is another, perhaps more colorful way, of saying the same thing: On va faire la fête or, for Mardi Gras celebrants: Laissez les bon temps roulez.
So, is it time to throw caution to the winds and put your entire future retirement investments into the stock funds in the Thrift Savings Plan? With these kinds of gains in the midst of disturbing world events, can the market possibly go down in the near future?
I am not a prognosticator and we do not provide financial advice for our readers. Each person is different. Each person’s risk tolerance varies, a person’s financial assets will vary, the age of the investor is important, the length of time until retirement is important, your retirement plan (CSRS or FERS) may make a difference in your economic outlook, and your own particular prediction about future events will all play a role in how you should invest your money for your future retirement.
Here is one safe prediction: The market will go down again. It may not be next month but it will go down. And the reasons for it to go down may be predictable or the events may seem to come out of nowhere and wreak havoc in the financial markets.
Here is one new worry that we may not have seen in several years.
According to the New York Times: “After radically scaling lending during the financial crisis, banks and the lending arms of the automakers have started to issue loans more aggressively.”
And does this scenario have a ring of familiarity?: “Even car buyers with tarnished credit histories are getting financing, in some cases without making a down payment. More than 859,000 new cars were sold to consumers with a so-called subprime credit rating in 2010, a nearly 60% increase from , according to CNW Marketing Research.”
What does this mean? Did we not learn anything from the financial crisis?
Actually, the banks probably did learn something from the financial crisis and it may be a reasonable conclusion: Banks can lend money with abandon and the taxpayer will bail them out.
Richard Band is a highly rated financial adviser. Here is his summation of what is now happening in the financial community:
“Readers have asked whether I believe another financial crunch (and
bear market for stocks) lies ahead, perhaps in 2012 or 2013. I think
it’s a foregone conclusion. With Bernanke & Co. issuing the financial equivalent of free
heroin, the “dealers” (banks) are only too happy to distribute the junk
to the streets—at an appropriate mark-up, of course. You’ll be
called upon later to serve in the emergency room, treating the
Participation in the LifeCycle Funds Continues to Grow
So, what does this mean for you?
In effect, it means enjoy the greater gains you have realized in your TSP account in the past few months. It also means don’t let the high emotion of the current returns stand in your way of remembering how you felt when you investments went down for months or in more than a year.
Here is an indication that many readers are thinking along the same lines.
As of January 31, 2010, there were 657,364 participants in the lifecycle funds. On January 31, 2011, there were 748,186 participants in the lifecycle funds.
The lifecycle funds are a way to diversify your investments automatically. It appears that many TSP investors are using this option and that their numbers are growing…perhaps as a result of concerns about the safety of their investments for their future retirement.