How are your retirement plans progressing?
If you are planning on using your TSP as a major source of retirement funds, you may be a little closer to retirement than you were before.
That’s because the Thrift Savings Plan funds all had a positive return for November. The economic indicators for the American economy have been very bullish in recent weeks. The stock market hit an 18-month high on December 1st, consumer confidence is moving up and the gross domestic product is surging at a rate not seen in years.
The results are evident in the rates of return of your TSP funds. The S fund continues to lead the pack with a highest monthly return for November. It is up 3.47% for the month with a 12 month return of 34.01%.
The I fund (international stock fund) came in second with a monthly return of 2.22% and a 12 month return of 23.91%. And C fund investors didn’t do too bad either with a monthly return of 0.91% and a 14.99% return for the past twelve months.
Bond funds also had a positive return for the month. The most conservative investment (the G fund) and the F fund both had a positive return of 0.30%. The G fund has had a positive return of 4% for the past 12 months and the F fund is up 5.22% for November.
Investors may be wondering why the S fund is so far ahead of the common stock fund (the C fund).
That usually happens in the first year of an economic recovery. Small companies can act more quickly. Also, their sales are obviously smaller than large companies and it is easier to achieve a larger percentage of sales when a company’s annual sales volume is $100 million than it is when a company’s annual sales are $5 billion or more.
What does the future hold? Many analysts are predicting continuing good news for investors in 2004 for stock returns but you are likely to see better returns in the larger companies in the later stages of an economic rebound. In other words, there is a likelihood the C fund will move ahead of the pack during the next twelve months if the economic recovery continues on track.
Investors may also want to note today’s headline (December 2, 2003) posted on the FedSmith.com site that reads “Professional investment advice for a “boomer” who wants to retire early.” The gist of the advice is that this federal employee needs to put a greater percentage of his TSP investments in stocks instead of having so much invested in the bond funds. The reason is the potential for larger returns in stock funds. On the other hand, the advisor doesn’t recommend this employee move all of his money at one time or put all of his money into one stock fund. Instead, he recommends diversifying into the several stock funds over the next year. This will reduce the employee’s risk but also give him an opportunity to increase his return to take advantage of potential stock price increases.
Regardless of your situtation, if you are a TSP investor, you can smile again as we approach the Christmas season. You have more money in your account than you did at this time last year!
Follow Ralph on Twitter: @RalphSmith47