You may not like the results but the official returns for the Thrift Savings Plan are in for the month of February. Investors in the bond funds won’t be disappointed. Unfortunately, all of the stock funds lost money for investors during February.
The small cap fund (S fund) lost the most during February. It was down 2.56% for the month and is down 18.35% for the past twelve months.
The international stock fund (I fund) was not quite as bad. It lost 2.29% for the month of February and it is down 17.49% for the past twelve months.
The C fund also continued its pattern of going down losing another 1.49% in February and 22.65% for the past twelve months. If you are looking for the silver lining in this, and you are an investor in the C fund there is one small consolation-you did not lose as much in your stock investments as investors in the other two stock funds.
Hopefully, our readers are diversified in their investments and own both stock and bond funds. If you lost money in stocks, but you also have bonds, it is good to know that the F fund continued to make money for investors. It went up 1.41% for the month and it is up 9.99% for the past twelve months.
The super-safe G fund returned 0.32% for the month and it is up 4.80% for the past twelve months.
What is going on with the stock market? Several readers have written to Fedsmith.com asking the same question in different ways: Should I sell my stocks and put all of my investment funds into bonds?
The answer, unfortunately, is that no one can be sure what will happen. Most financial advisors advise putting your investment funds into different sectors so you don’t miss the major advances that can happen with the stock market.
We are still working through an investment bubble from the late 1990’s. It has been three years since that bubble popped. Since that high point, NASDAQ stocks have declined about 78%. TSP investors have not had that much of a decline in this period (a small silver lining in this dark cloud TSP stock investors are under). Based on past business cycles, it will take more than the three years that have passed to get beyond the “irrational exuberance” of the investment bubble (our apologies to Alan Greenspan).
Another wild card is the war in Iraq. Will it happen? If it does happen, will it be short? Will there be a lot of casualties? Will the oil fields be torched? Investors don’t like uncertainty and we have a lot of it at the moment.
Very few analysts see a roaring bull market in the near future. As hard as it is to believe, stocks are still expensive by historical standards-although not nearly as expensive as they were three years ago. In other words, if the economic recovery continues, and if there is not a major problem for the United States in Iraq, we may get back to modest stock increases during the next year.
But it’s your money. How confident are you in our economy and our military forces? Your answer will probably have a large influence on how you choose to invest for your retirement.
Follow Ralph on Twitter: @RalphSmith47