TSP Investors Express Optimism by Moving Money into Stock Funds

Investors in the Thrift Savings Plan are reversing a trend that has been continuing for months: They are again moving money into the TSP’s underlying stock funds and out of the safer G and F funds.

We don’t know what most readers think of current economic trends and the future performance of the stock market but the investment actions of those in the Thrift Savings Plan (TSP) reveals what these investors must be thinking.

TSP investors apparently think the stock market will continue to go up as they are moving their money from the security of the G and F funds into the funds with more growth potential. And, in May, the Thrift Savings Plan had its third successive month of gains (See Three Successive Months of Gains For the TSP)

In April 2009, $602 million left the G fund while the C, S and I funds all took in hundreds of millions of dollars.

The same trend continued to May as $1.6 billion was transferred from the G and F fund into the Thrift Savings Plan’s lifecycle or stock funds. The largest gainer amont the TSP stock funds was the international stock fund (the I fund) which took in $567 million of transferred funds in May. $306 million was transferred into the L funds.

But, putting the habits of TSP investors into perspective, both CSRS and FERS employees have most of their money in the G fund. CSRS employees, who are probably generally closer to retirement, have 59% of their money in the G fund. 20% of their money is in the C fund and only 4% is in the I fund.

The trend is similar for FERS employees but they have been more inclined to put money into the lifecycle funds and C fund and less in the G fund. FERS employees have 51% of their money in the G fund, 22% in the C fund and 6% in the I fund.

Those under the FERS system have put more of their money into the lifecycle funds and less in the G funds than employees under the older CSRS system.

Why are there differences between the two groups?

In all likelihood, FERS employees have a longer time until their planned retirement as new employees are going into the FERS system. One would expect older employees to be more conservative with retirement investments as they will need the money sooner and their investments will have less time to recover after a stock market decline.

Very short term trends are not particularly significant but, for those who pay attention, there is currently a correction or downturn in the stock market this month. The C fund is down about 3% so far in June and the I fund is down about 4.9% for the month. Both of these funds are still showing a positive return for the year.

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