July 2012 was a good month for TSP investors, despite the summer doldrums. The C fund gained $1.40% and the F fund gained 1.38%. In effect, both stocks and bonds provided a favorable return to investors. The S fund was down 0.62% for the month while the I fund was up 0.56%.
All of the funds are now showing positive returns for the year and those investors that have stayed with the underlying stock funds have been rewarded for their patience. The C fund is now up 11.12% so far in 2012 while the S fund has gained 8.53%. The F and I funds are both up 3.83%. The G fund is positive, as usual, with a small gain of 0.91%.
Here is a summary of how the funds have performed so far this year:
The lifecycle funds have also done well although none of these funds match the year-to-date returns of the C and S funds.
The L2050 fund is now up 7.88% for the year and the L Income fund, on the other end of the scale, is up 2.75% for the year. Here is a summary of how these funds performed for investors in July and so far in 2012:
TSP Investors Move Money Out of Stocks and Into Bonds
During June, TSP investors moved a considerable amount of their investment dollars out of the stock market and into the underlying bond funds. $535 million was transferred from the C fund; $428 million from the S fund and $220 million from the I fund. On the other end, $720 million went into the G fund and another $722 million into the F fund.
Data Breach Update
As we advised readers in late May, a computer containing TSP participant data was subject to a cyber attack. The TSP notified all affected individuals by mail and the TSP and the contractor took prompt action to address the incident and made adjustments to computer security. In its latest report, the Federal Retirement Thrift Investment Board reports that there is no evidence the data has been misused.
Here are a few tidbits of information from the TSP that will interest those who track the performance of the TSP closely.
The trading costs for the F fund are fairly high (13 basis points). The reason for the high costs is lower liquidity in the bond market at the beginning of the year.
The rate of return on the G fund was recently the lowest it has ever been. You can see this in the monthly returns for the G fund. For example, going back to 2008, there were months where the monthly rate of return for the G fund was been as high as 0.40%. Back in 2000, monthly returns were up to as high as 0.55%. For those who may be counting on current income for their retirement, low monthly returns are expensive as many of the expenses are impacted by inflation and the lower income can be hard on a monthly budget.
This isn’t a surprise since some bonds have been sold at a negative interest rate which means that investors are paying money to have their money invested in a government bond.
The result of this can be seen in the difference between the L Income fund and the G fund. The G fund has had a return rate of 0.91% so far in 2012 but it is very safe. The L Income fund has returned 2.62%. The difference is that the L Income fund has benefitted from having some of the assets invested in the stock funds which have had a higher rate of return even though there is, in theory, more risk in stock investments than in bonds.
Check out the return rate of all TSP funds along with charts depicting the annual rates of return for each of the underlying TSP funds in the TSP Corner.