Imagine sitting in your office in the cold weather back on December 31, 2005. Some readers were probably contemplating retirement–either in the early days of 2006 or perhaps several years into the future.
If someone were to tell you that your thrift savings plan (TSP) investment would give you a 10% return in the first six months of 2006, you would have been very happy.
In fact, some readers have had a return of more than 10% on a portion of their TSP investment since that cold December evening.
When contemplating your TSP and your retirement future, it is better to keep a long term perspective. Some readers have been unhappy with their TSP returns in May and June. That is understandable as the returns were negative in May and relatively flat in June.
Our perspective is usually colored by the short-term results. In evaluating your investment results, a longer term perspective is necessary to prevent taking action that can hurt your overall financial performance. As a result of mediocre performance in the TSP funds over the last 60 days, some readers are not pleased.
Unfortunately, stock and bond investments usually fluctuate. In recent weeks, they have been fluctuating considerably. But, from a longer term perspective, at least some of your TSP investments have made money for you in 2006.
The 10% return mentioned above was from the I fund. International stocks were still on a tear earlier this year. The I fund went up in January, March and April and, as of June 30, your shares in the I fund were still up despite having lost money in May and the flat performance of June.
The other TSP stock funds have not done as well as the I fund but your TSP investments are still up for this year.
The S fund, for example, is still up for 2006 with a gain of just under 6%. Each of your TSP shares is worth 94 cents more as of June 30 than it was at the close of business on December 30, 2005.
The C fund, which is based on the stocks in the S&P 500 index, is also up for the year. It has gained just under 3% for the year to date.
The G fund always makes money for investors–although not as much as the stock funds usually do over a longer time period. It is up over 2% for the first six months of the year without the fluctuations in the stock market. In other words, that gain of more than 2% was made without any risk for these investors. (Although keep in mind an investment that returns 4.5% in a year in which inflation runs 5% or more won’t help your retirement money grow in real dollars.)
The one loser for 2006: the F fund. The rise in interest rates has not been kind to bonds this year. The loss is very small (about seven cents per share) but no one likes to lose money–especially when saving for retirement.
With this in mind, your TSP investments are making money for you so far in 2006.
What does this mean for the rest of the year? You will have to use your own crystal ball to make that decision. Many analysts think that stocks will make money this year but probably less than 10% for the year.
The only certainty: we will tell you how your investments fared in 2006 early in January.