Gas and Expenses Are Up But Your TSP May Give You Reason to Cheer
By Ralph Smith
Monday, April 24, 2006
It is also possible your homeowners insurance has taken a big jump this year as insurance companies are trying to make up for money lost in natural disasters last year. Paying that bill can also make you feel broke.
But, to help get you out of the doldrums, here is some good news that will surprise some readers.
The American stock market isn't setting new all-time records but investors in the Thrift Savings Plan still have considerable reason for feeling good about their retirement fund investments.
Stock market indices were at their highest points a few years ago. But, as of last week, the Dow Jones Industrial Average was the highest it has been in six years. The Standard & Poor's 500 index was at its highest point in several years as well. (The C fund in your TSP is based on the S&P 500 index.)
So how are your TSP investments doing in 2006?
As you can see from the data in the TSP corner, most of your investments are doing very well. But, as one fund in the TSP proves, it is possible to lose money in your TSP as well.
The I fund is still the leader in TSP returns since the first of the year. It is up $1.87 since early in January for a gain of about 10% so far this year.
The small company fund has also treated investors well. The S fund is up about 9% for the year.
C fund investors also have reason to be in good spirits this year. This fund is up about 53 cents since early January for a gain of about 3.9%.
Put in practical terms, here is a rough guide to your results. If you had $100,000 on January 1, 2006 in the I fund, you would have had about $110,000 at the end of last week. Not a bad income for the first four months of the year.
Your $100,000 in the S fund would now be worth about $109,000 and your C fund investment would be worth about $103,900.
The G fund is also up--it has had a gain of about 26 cents since the first of the year--a gain of about 2.3%--with very little risk. Readers occasionally write and ask questions like "How come the G fund does not have more movement? My C fund jumps around but the G fund often stays the same."
One reason is that the G fund does not move much. It is likely to go up 4.5% - 5% over a 12 month period. There is not much volatility. Your C fund may go up 33% in one year (as it did in 1997) or down 22% in a year (as it did in 2002). In between this wide range, there may be even more fluctuation so your fund can easily go up or down .25 cents in one day. The G fund just sits there but investors come out ahead at the end of the year--probably considerably more or less than the more volatile stock funds.
The only loser in the basic five TSP funds this year is the F fund. It has declined 11 cents. In effect, your $100,000 investment as of January first would now be worth a little less than $100,000.
This has prompted some TSP investors to ask "How can I lose money in my TSP investments? I thought bonds were a safe investment but I have lost money!"
For those who may have missed the point, it is possible to lose money in the TSP as some investment will do better than others in different situations. Here is a quick guide to how the F fund can lose money.
So what is going on in the stock market? Why are prices up so far this year?
The answer is simple: companies are making money. According to the Wall Street Journal, 70 percent of companies posting earnings for the quarter are above the average estimate. Google has been a big winner as its shares jumped about 8% in one day as revenue went up about 79% from the same quarter last year.
In effect, companies are making more money so the stocks are worth more.
That may not help you pay your credit card bill later this month or next when you see how much you are spending on gas for your car. But, while your current expenses are going up, at least your TSP has probably fared well unless you have put all of your money into the F fund.
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