TSP's C Fund Up More than 10% in 2013

By on April 2, 2013 in Current Events with 8 Comments

At the end of 2012, the economy was slowing down after one of the most anemic recoveries in the modern era and earnings growth for companies were off of their peak figures. Also in 2012, the C fund returned 16.07%; the S fund was up 18.57% and the I fund was up 18.62% for the year.

In the political arena, there was a dispute over the so-called fiscal cliff followed shortly after that with doomsday scenarios worthy of a Hollywood horror movie about what would happen as a result of sequestration of a small amount of government spending.

Probably as a result of the fear over the fiscal cliff, in December $3 billion was transferred into the G Fund by TSP investors.  In January, about $3.7 billion was transferred out of the G Fund. Also in January, about $1.5 billion was transferred into the S fund and about $1.49 billion went into the lifecycle funds. A little less than $1.2 billion went into the C fund. In February, TSP investors transferred about $1.3 billion out of the C fund and another more than $1.1 billion out of the S and I funds. More than $2.5 billion was transferred into the G fund.

The result of the political dispute was that the government took at least a small step toward cutting spending or at least planning for it about March 1, 2013. There were plenty of predictions for a stock market plunge. That did not happen. The stock market hit new highs in March. In fact, the widely watched Dow Jones Industrial Average closed out March at at an all-time high, even adjusted for inflation.

The result was that TSP investors who ignored the cries of panic were rewarded for their patience. The S fund is up 13.09% so far in 2013 and the C fund is up 10.61% for the year. Those that may have pulled money out of stocks and sought out the safety of the G fund have seen a total return in 2013 of 0.38%. Here are the results for all of the TSP funds for March and the year-to-date and the past 12 months for all of the TSP funds.

G Fund

F Fund

C Fund

S Fund

I Fund

Month

0.13%

0.07%

3.75%

4.69%

0.88%

YTD

0.38%

0.01%

10.61%

13.09%

4.34%

12 Month

1.46%

3.98%

13.98%

17.16%

11.59%

L Income

L 2020

L 2030

L 2040

L 2050

Month

0.73%

1.69%

2.12%

2.44%

2.71%

YTD

2.11%

5.00%

6.28%

7.23%

8.07%

12 Month

4.15%

8.42%

10.22%

11.55%

12.72%

There is an old saying on Wall Street for investors: “Don’t fight the fed.”

Many investors have followed this and earned significant profits as a result of the Federal Reserve essentially doubling the pace of buying government bonds since last year. It is currently buying about $85 billion in bonds per month. This has meant that investors buying stocks and other more risky assets have profited, as you can see from the returns in the TSP stock funds, as the low interest rates created by the Federal Reserve have made more conservative investments like Treasury bills less attractive.

Now, many investors are wondering when the Federal Reserve will end or cut back its policy of artificially holding down interest rates because, when that happens, there could be a sudden shift in the stock market. We don’t know when the current policy will end and those that sell stocks too early could lose out on more significant gains. The result of the action by the Federal Reserve is to drive yields on bonds down below the inflation rate.

For those investors who are retired or nervous about their investment nest egg, there are tough decisions to make. Do you try to preserve or increase your assets by buying stocks and live with the risk of losing money or do you buy more conservative bonds that will preserve your principal investment but lose ground to inflation?

So far, those that have kept money in stocks are considerably ahead while those that have putting money into the G fund may be sleeping well but, perhaps, not too happy at the price they are paying for that security with the wide variation in returns between their investment and the stock funds available to them in the TSP.

Not having a reliable crystal ball, we will not attempt to tell you what the stock or bond markets will do in the near-term future. Many financial advisors counsel against “market timing” and moving money into or out of an investment based on what you think will happen over the next few weeks or months. Instead, they advise a more balanced approach of investing in various forms of investments with both stocks and bonds. The lifecycle funds do this automatically for those that elect to put their TSP investments in one of the L funds. Others obviously move money around in an attempt to increase their rate of return.

We wish all of our readers the best of luck in making investment decisions that best match their approach to financing their retirement assets.

© 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 on federal human resources.

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