All TSP Funds Move Up in August

The August returns for the TSP funds are all in positive territory. What about the rest of the year?

Investors in the federal Thrift Savings Plan had a good month in August. Every single TSP fund showed a positive gain.

The biggest gain went to the I fund with a monthly return of 2.76%. The I fund is also up more than any other fund for the past twelve months with a gain of 23.44%.

The C fund finished in second place in August with a gain of 2.36%. It is still considerably behind the I fund over the past twelve months but it is still up 8.89% for the twelve month period.

The S fund did not do badly either. it finished up 2.15% in August and is up 8.72% for the past twelve months.

The F fund ended up with a return of 1.58% for August. The return for the past twelve months won’t cheer investors though. It is only up 1.77% for that time frame.

The G fund had about the same return as it usually does for the past month: 0.44%. It has a return of 4.91% for the past twelve months.

Fund C S I F G
12 month return 8.89% 8.72% 23.44% 1.77% 4.91%
August return 2.36% 2.15% 2.76% 1.58% 0.44%

Investors in the lifecycle funds will also be happy with their decision to invest in these funds.

The L2040 fund finished August with a return of 2.22% and a return of 11.47% for the past twelve months. The fund with the lowest return for August was the income fund with a return of 0.90% and a twelve month return of 6.28%. Here are the complete returns for the L funds for August and for the past twelve months.

Last 12 Months August Return
L2040 11.47% 2.22%
L2030 10.55% 1.96%
L2020 9.95% 1.81%
L2010 8.65% 1.39%
LIncome 6.28% 0.90%

Here is a word of warning to investors though.

September is usually not a good month for stocks. In fact, September is usually the month with the biggest declines of the year. According to the Wall Street Journal, since 1950, the S&P 500 (the index on which the C fund is based) has declined by an average of 0.7% in September. February is the only other month of the year in which stocks usually go down. The S&P goes down an average of 0.2% in that month.

The good news from this pessimistic set of statistics though is that it usually gets better late in the year. The best two months of the year are typically November and December.

There are other factors that often lead to a year-end stock rally–at least if you have faith in historical precedent. This is the second year of President Bush’s term in office. Stocks usually go down in the second year of presidential terms and then have a strong rally toward the end of the year. In addition, oil prices may go down later this year as the hurricane season has been relatively mild (so far!) and oil prices have dropped as Hurricane Ernesto decided to go toward the Eastern United States instead of hitting the Gulf Coast which is a major source of oil.

Unfortunately, there are no guarantees. Concern about the sale of housing could continue and may have an impact on spending and, as usual, the situation in the Middle East is volatile and there could be another eruption in that area of the world that will have an impact on stock prices.

But, for now, TSP investors can bask in the sunshine of the August returns and hope that the factors for a year-end stock rally stay in place.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47