The Value of the F Fund in Your Retirement Planning

View this article online at and visit to sign up for free news updates
By on April 2, 2008 in Current Events with 0 Comments

The Dow Jones stock average went up almost 400 points yesterday.

Keep that in mind when reviewing the results of the TSP funds for the month of March and the year-to-date. It may make you feel at least a little better. Falling housing prices, soaring oil prices, rising foreclosures on homes, and tighter credit standards have all combined to create a perfect storm of economic problems. The results are reflected in falling stock prices as the C fund is down 9.48% for the first quarter of this year, the S fund is down 9.50% and the I fund is down 8.97%.

The C fund and the S fund both had negative results for the month of March with the C fund losing 0.46% and the S fund 1.43%. The I fund did better with a positive return of 0.18%.

The F fund in the Thrift Savings Plan (TSP) is sometimes the Rodney Dangerfield of the TSP funds–It doesn’t get any respect. The G fund is the safe haven; the I fund is used by market timers to try and juice up their returns, the S fund is good for fast growth as we are coming out of a recession and the C fund is the old stock market standby that most people think of when they want to put some of their retirement funds into stocks. But what is the F fund good for?

The F fund is a bond fund with government, corporate and bonds backed by mortgages. Both the G and F funds had positive returns and the F fund is up 7.87% for the past twelve months—beating out every other fund in the TSP array by a wide margin.

There is a lesson on this. A few years ago, readers were asking whether the F fund was a risky investment. The question is a good one. Take a look at the yearly returns for the TSP funds and the F fund frequently provides a much lower return than stock funds. In fact, for 15 out of the past 19 years, the F fund has had a lower return than the C fund.

For example, in 2005, the F fund had a return of 2.40%. That is better than a loss but the C fund had a return of 4.96%, the S fund returned 10.45% and the I fund returned 13.63%. In 1999, the F fund lost 0.85% and the C fund had a positive return of almost 21%!

Stock and bond prices often move in opposite directions. While your stock funds have been going down in recent months, the F fund has been performing well. The F fund has done better than the C fund for each of the past five months. The investment in bonds, which some people consider staid and boring, can be a good cushion for your retirement funds when (not if) your stock funds start going down.

And, while the returns from April 1st are not included in the March 2008 TSP returns, take a look at how the F fund fared. There is a correlation between how bonds and stocks fared. The F fund went down 0.05 on a day when the stock market took a big leap. The I fund was up 0.62 yesterday and the C fund was up 0.54.

The question everyone would like answered is whether the stock market will start providing positive returns once again after five straight months of negative returns for most of the TSP stock funds. Chances are the big rise is not the start of a new stock market trend although it may indicate that we are at least near the bottom of the recent drop. If you know, or think you know, how the market will perform in the next couple of months, this may be a good time to put all of your money into stocks or put it all into bonds–depending on the accuracy of your crystal ball. But, for those of us who cannot predict with any certainty the short-term future of the market, keeping a diversity of investments in your retirement portfolio is often thought to be the safest way to save for the future.

© 2019 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.


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 onĀ federal human resources. Follow Ralph on Twitter: @RalphSmith47