A number of readers are looking for the magic bullet that leads them to retirement nirvana. Most want to invest their TSP funds that will lead them to the big bucks necessary for a leisurely retirement. And they want to do it now.
I opened my mail this week, and, just as with most weeks, I had a reader ask: “Please tell me which TSP funds I should invest in so that I will get the best return from my TSP money.”
And, I received another e-mail that read along these lines:
“FedSmith.com should provide readers with a service telling them how to successfully invest their retirement funds. As a former federal employee, you seem to be knowledgeable of how the system works and also know quite a bit about investing. Why don’t you provide this service?”
Fortunately, to answer these questions, I also received an e-mail that provides the answer.
This timely e-mail read along these lines (and before sending e-mail saying we are too liberal or too conservative after reading this example, please read the rest of the article first and then send in your comment!):
“A victory by President George Bush is a lock despite the wavering polls that lead voters to think the election will be close. With a Bush victory, stocks are poised to go up 13% within the first several months after the election. The financial agenda of John Kerry, who promises nothing but higher taxes and more redistribution of wealth, will be out of the picture after November and the artificial depression of stock prices will be lifted and quickly lead to higher value in the stock market.”
The e-mail concluded with a pitch to subscribe to an investment service that would tell me which stocks are best positioned to take advantage of this new opportunity.
So, there you go. Based on this information, you should ditch your investments in the G and F funds, and immediately put all of your money into stocks–probably the C and S funds since those feature American stocks.
Is there a problem with this scenario? Obviously there is.
Most readers will quickly recognize the universal desire to have an easy answer that will help everyone.
Most readers will also recognize that there isn’t any universal answer to the question of “How should I invest my money to get the best return?”
There are plenty of services that purport to meet the desire of getting the best return for your money. Some of them are free. Some of them will charge you for their advice.
Here is my advice. The advice is free but it won’t provide the quick answer you may be seeking.
First, no one can predict the short term movement of the stock market. Even if a prognosticator is confident in the outcome of the upcoming presidential election, no one is certain how the market will react or what other events will have a major impact on stock prices. Will there be a successful terrorist attack? Will interest rates spike? Will the price of oil move up or down?
If you choose to follow advice from well-meaning people on how to quickly move your TSP investments from one fund to another in hopes of catching the next rise or fall of the stock market, you are going to lose money. On occasion, you may get lucky and correctly put more or less money into stocks to take advantage of the latest fluctuation.
But there is plenty of evidence that the most successful investors in the world cannot predict short term market performance. The investors that are spectacularly or even moderately successful generally invest for the long term.
Second, events are unpredictable and how the financial markets will react to these events is also not predictable. Don’t waste your retirement money by guess on the outcome of specific future events.
Third, each person is different. With over two million hits in a month, FedSmith.com cannot write an article giving this wide range of readers the best way to invest your retirement funds based on what the stock market will do next month or even next year. Some of you are retired; some are just starting your federal career; some are willing to take more risk and have 20-30 years to see your money grow; others will get an ulcer when the market drops 10%; some readers have a million dollars in their TSP; some have under $1000.
Each person is unique. Your best course of action is to steer clear of short term solutions and decide how to meet your longer term goals. This will almost always entail investing money in both stocks and bonds but with different allocations for different people.
There are plenty of people and services willing to tell you how to invest your retirement funds. Some of this advice will be good. Some of it will not apply to you. Ignore the promises of quick, easy returns and keep your long terms goals in mind.
It’s your retirement and you control how successful it will be. You don’t need to spend your career sitting in front of your computer moving money into or out of the TSP funds trying to guess the next market move.
Some of the articles listed on the left hand side of this page may be helpful in meeting your goals.