The Thrift Savings Plan recently released the ten-year compound returns for the five basic funds. For some reason they delayed releasing them this year until this past week.
As has happened each year for quite some time, the funds are in a different rank order. For the ten-year period 2004 through 2013 the funds were, in descending order, S, C, I, F and G. The most recent ten-year period (2005 through 2014) the F and I funds swapped places, so we now have the ten-year performance, in descending order, S, C, F, I and G.
For those who are curious, the ten-year compound returns are:
You can see the complete table on the TSP website along with other tables.
Beginning in 2007, I included a table showing how the five basic funds have performed for the previous ten-year period in the coursebooks that I use for my pre-retirement seminars. The table has never had the funds in the same rank order from year to year.
In 2013, I was teaching a pre-retirement seminar to an agency where I had previously delivered a class in 2010. One of the participants in the 2013 seminar had not only been in the 2010 class, but she had saved the coursebook and brought it to class. Out of curiosity, I compared the TSP ten-year compound returns in both coursebooks, and not one single fund was in the same rank order as it had been three years before.
Usually, but not always, a stock fund is in first place. For a few years after 2008 we found that the F fund was number one in the ten-year compound chart. Usually, but not always, the G fund brings up the rear. Once again, for a few years after 2008 the G fund was not last. Always keep in mind that it’s dangerous to make assumptions about future returns based on past performance. Statistics are a snapshot of how things stand at a specific time and should not be viewed as having any probative value.
So what’s a person to do if they’re looking to grow their TSP account as well as avoid losses?
Some TSP participants will stick with the G fund (3.19% for the last ten years) to avoid losses. A little over 40% of the money in the TSP was invested in the G fund at the end of 2013. The G fund has never been accused of fluctuating wildly. It only goes in one direction – up; and it only has one speed – slow. From the G Fund’s inception in April of 1987, through the end of 2013, the G fund has more than doubled inflation. $100 invested in the G fund in 1987 would have turned into $424; of course, it would take $208 2013 dollars to buy what $100 would have bought back then.
One might ask why I am using figures that are from the end of 2013? The reason would be that the TSP has not yet (it’s March 15, 2015 when I write this) updated the “fund sheets” that you can find in the forms and publications section of their website.
A person wanting to avoid risk and get a better historic return that the G Fund might choose a fund such as the L Income Fund. The L Income Fund has outperformed the G Fund in 6 of the last 9 years. In 2014, when the G fund returned 2.31%, the L Income Fund saw a gain of 3.77%. In 2008 when stock funds were racing towards the bottom, the L income fund lost (only) 5.09% while the G Fund returned 3.75%. The TSP does not show ten-year compound returns for the L Funds because the L funds will not have been around for ten years until this August 1st.
Others who are concerned about losses may choose to utilize a TSP allocation service. Allocation services will monitor TSP performance and suggest changes in allocation based on formulas they use.