I Fund Leads All TSP Funds in April and in 2015

By on May 3, 2015 in Current Events with 5 Comments

So far in 2015, international stocks (the I fund) have been good to federal employees taking advantage of their ability to invest in the Thrift Savings Plan (TSP). The I fund is up 10.05% so far for the year and was up 4.11% just in April. While all of the other TSP funds are also up for the year, the 2nd best fund, by comparison, is up 4.16% for the year (the L 2050 fund).

This is a significant change from last year. As we noted in an article published in January 2015, “The I fund has provided more lower returns (or losses) than the C fund in four of the last five years.”

In the same article, we noted that “While stock markets in many foreign countries are still facing more problems than in the United States, for those who like to take a more contrary approach to investing, values for foreign stocks are now generally lower than domestic U.S. stocks as a result in the returns in U.S. stocks over the past several years. Foreign stocks are now offering better values than many American stocks  and it is only a matter of time before foreign stocks lead in returns for investors.”

That is, in fact, what has occurred with the I fund as foreign stocks have been moving along ahead of U.S. stocks so far this year. No one knows, of course, if this rally in foreign stocks will continue, but the significant turnaround took many investors by surprise and makes a good argument for diversifying your future retirement investments in the TSP. While financial advisors often suggest 20% – 30% of a person’s investment portfolio in foreign equities, at the end of March, 5% of TSP investments were in the I fund. Part of the reason for this may be, as noted above, that “The I fund has provided more lower returns (or losses) than the C fund in four of the last five years.”

Despite the obvious volatility in the stock market, TSP investors are still ahead for the year. Here are the returns for all of the TSP funds for the month of April, the year-to-date, and for the past 12 months:

G Fund F Fund C Fund S Fund I Fund
Month 0.15% -0.28% 0.96% -1.50% 4.11%
YTD 0.62% 1.40% 1.94% 3.81% 10.05%
12 Month

2.15%

5.09% 13.06% 11.71%

1.93%

L Income L 2020 L 2030 L 2040 L 2050
Month 0.37% 0.81% 0.95% 1.00% 1.16%
YTD 1.41% 2.73% 3.32% 3.69% 4.16%
12 Month 3.96% 6.14% 7.27% 8.04% 8.58%

Are You Prepared for a Drop in Stock Prices?

A question frequently asked by investors is: “Is the stock market going to go down in the near future after hitting new highs this year?”

No one knows the answer to that question. A drop in stock prices is a possibility but the stock market hitting a new high does not mean that a significant stock market drop is imminent.

One question that is worth asking yourself while the market is up: “Are you prepared for the stock market to fall 10%?”

While the market may go on to hit new highs for the new year or two, it always goes down at some point—sometimes when a big drop is not expected. If you are not prepared for a fall of 10% (which is a correction only; a bear market is a decline of 20% or more), you may be taking on too much stock risk in your portfolio. It is better to cut back on your stock holdings while prices are high and you are not experiencing an emotional panic about market declines. When the market is down 10%, many investors decide it is time to sell some of their stock holdings. This means that your timing could end up being worse than bad—particularly if a rebound occurs shortly thereafter.

TSP Tidbits

The FERS participating rate in the TSP went above 87% in March for the first time since July 2004. The average account balance for civilian TSP investors are approaching the $100,000 mark with average TSP balances for both FERS and CSRS investors now above $95,000.

According to the TSP, the number of Roth accounts has increased over 20,000 per month since November of 2014. And, in what some may take as a warning signal of an approaching market top, there is a shift among investors from the G fund to the C, S and L funds.

In March, more than $1.9 billion was transferred from the G fund and $624 million was transferred from the F fund. $31 million was also transferred form the I fund.

The C fund gained $604 million in transferred investments in March, the S fund gained almost $1.2 billion and the L funds gained $770 million.

Enjoy the gains TSP investors have enjoyed so far in 2015 but remember to ask yourself if you need to rebalance your TSP investments to provide a level of risk that is acceptable for your personal financial situation.

© 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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