Good Year for TSP Investors: All Funds Up YTD and 12 Months

All of the TSP funds had positive returns in May and are also all up for the year-to-date and the past twelve months.

A popular phrase for some investors is “Sell in May and go away” meaning that stocks should be sold early in the year and then reinvested in November after the summer doldrums. This is because the period from May – November is often more volatile for stocks. While this may prove to be true for the year, so far in 2014, the strategy has not helped investors.

The C fund in the federal Thrift Savings Plan (TSP) was up another 2.35% in May and up 5% for the year. It is up 20.54% for the past 12 months.

The S&P 500 index, the index on which the C fund is based, was up for the fourth consecutive month in May as the stock index hit a new record high. (See the TSP monthly returns for all TSP funds at

The F fund also went up in May which is something of a surprise since bond rates are very low and many analysts have been predicting bond prices will fall. If interest rates paid for new bonds go up, bond fund values go down.

Here is what happens:  There has been an increasing demand for bonds in 2014. An increasing demand causes the rates for bonds to go down. When the rates for bonds go down, the value of bond funds goes up. When the rates for bonds go up, the prices of bond funds go down. Bond funds go down when this occurs because the bonds in the existing funds are paying less than the new bonds being issued.

In the past, when the United States is emerging from a recession, the interest rates on bonds go up. The fact that bond rates are falling now makes some investors nervous. Falling bond rates indicate the underlying economy is not very strong. It also means that many investors think that stock prices in the near future may not continue to go up if corporate profits shrink because the economy is not growing.

The G fund has the lowest return of any of the TSP funds for the year-to-date and for the past twelve months as the rates on Treasury bonds have continued to stay at very low levels. The G fund has a return of 0.98% so far in 2014 and has returned 2.26% to investors over the past 12 months. By comparison, the L Income fund, which is the most conservative lifecycle fund, has returned 5.81% over the past twelve months and 1.87% for the year-to-date because this fund is also invested in stocks as well as in bonds. (See Is a Lifecycle Fund the Best Choice for Your Thrift Savings Plan?)

For those who may have sold TSP funds in May and may have been disappointed to see stocks go up, keep in mind that your strategy may not have been wrong–just premature. Looking at monthly returns for the S&P over the last 10 years, the month of June has averaged a 1.33% decline for the S&P 500 while the second worst month is August, which has averaged a 0.45% decline over the past decade.

Of course, no one knows what will happen in the next month or the rest of the year. Typical advice for investors is to remain diversified in the types of stocks that you own and also remain diversified by investing in both stocks and bonds. Or, if you are more adventurous, make your best guess and hope that you are right. If you guess correctly, your retirement income may be higher when you reach that point in your career. On the other hand, most people cannot guess correctly other than random chance and you may be gambling with your future retirement income.

For now, you can celebrate your good fortune with the May TSP returns. Regardless of where your money was invested, you earned a positive return for the month, the year-to-date and for the past twelve months.

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