Those who subscribe to the saying, with regard to the stock market, “Sell in May and then go away” may have been disappointed with the monthly results.
For May, the C fund gained 2.34% and the S fund was up 2.71%. The biggest loser was the I fund, down 3.12% followed by the F fund which lost 1.78%. Here are the results for all of the TSP funds for May:
|G Fund||F Fund||C Fund||S Fund||I Fund|
|L Income||L 2020||L 2030||L 2040||L 2050|
May ended on a sour note for stocks. In the last five minutes of trading on Friday afternoon, the major stock market index dropped 70 points. But, even with the rapid selling at the end of the day on Friday, May 31st, the S&P 500 index (the index that is tracked by the C fund in the Thrift Savings Plan) was up 2.1% for the month. With the results in for May, this index has been up for seven months, the longest such stretch for gains since September 2009.
You can check out the monthly rates for all of the TSP funds where you will see that the C fund has been up every month so far in 2013. The last month in which it was in negative territory was October 2012 when the fund lost 1.86%.
The fund with the largest gains in 2013 so far is the S fund. It is up 16.91% so far in 2013. The S fund also has the largest gains for the past 12 months with a gain of 31.05%. Over the past 12 months, the I fund is a close second with a return of 30.96%.
The F fund lost money for investors in April as interest rates started to increase. Bond prices often go down when interest rates go up which is why the F fund did not fare as well
Allocation of TSP Investments
The G fund is the Thrift Savings Plan fund of choice for most TSP investors. The TSP has about $350 billion under its management. About 40% of all TSP assets are invested in the G fund and about 25% is in the C fund. 15% is in the lifecycle funds and about 8% is in the S fund. Roughly 7% is in the F fund and about 5% is invested in the I fund.
The G fund is often considered the safest fund in the TSP. It does not lose money, although the rate of inflation may result in a loss of purchasing power, and the G fund is only available to TSP investors. On the other hand, while it is the safest fund, stock funds are usually considered a better long term investment. While stock funds can and do lose money when the market is down, the rate of return can also be much more generous to investors. A case in point is that the G fund has provided a rate of return of 1.41% over the past 12 months while the stock funds with the highest rates of return have been more than 30% and the C fund has returned more than 27%.
In April, TSP investors were apparently preparing for a down month for stocks in May. About $171 million was transferred from the C fund; $221 million from the S fund and $164 million from the I fund. $468 million was put into the lifecycle funds; $48 million into the G fund and $40 million into the F fund.
We are now into June. Some readers appear to like to play the odds for the coming month as noted above. For what it is worth, the stock market does not normally do well in June. Of course, in 2012 the C fund went up 4.13% and the I fund was up more than 7%. But, over the past six years, 2012 was only year that the stock market indices were a winner for the month and that may have been a rebound after big losses in May.
Stocks were hit especially hard in 2008 and 2010, down 8.4% and 5.2%, respectively. Of course, your guess is probably as valid as anyone else’s guess in predicting how stocks will do in June 2013.
Sequestration and Your TSP and Other Notable TSP Facts
In March, the TSP participation rate reached 87.1 percent. This is the first time it has been higher than 87 percent since 2004. Assets under management are approaching $350 billion, and approximately 20,000 Roth accounts are being created each month.
Currently, the default fund for new TSP investors is the G fund. These “default investors” continue to have their money put into the G fund until they make an election directing their contributions into one or more of the other fund options available in the TSP. It is possible that the default fund will eventually be changed to the lifecycle funds instead of the G fund. No decision has been made but discussions are underway within the TSP to consider making such a change in the future.
In a recent meeting, the TSP board considered sequestration and its impact on TSP investors. The TSP board considered the possibility of allowing participants to take a second general purpose loan from their account, but determined that it ultimately may not help participants, and would require thousands of hours of work to implement. TSP participants do have the ability to reamortize their loan over a longer period, up to five years for a general purpose loan.
The TSP has also released a “fact sheet” on TSP and sequestration which you can download and print for your own information.