What is the One TSP Fund Up 20% in 2017?

Which TSP fund has had the highest rate of return so far this year? The answer may surprise you.

The Thrift Savings Plan (TSP) is a major benefit for federal employees. The expenses are lower than private sector funds and the returns have been very good.

One TSP fund has a return of over 20% so far in 2017. Only 4% of TSP investors have money in this fund though.

The I fund invests in International stocks. It is up 2.52% for September; 20.30% for the year-to-date; and 19.49% for the past 12 months.

The fund in second place for the year-to-date is the C fund with a return of 14.24%.

Why Do So Many Investors Shun the I Fund?

In part, it is fear of the unknown. While we may buy many products from foreign companies, larger companies sell many products in the United States. Many Americans do not know they are foreign companies. Nestle, for example, is a Swiss company. When buying a variety of products such as Gerber baby food, Alpo dog food, Butterfinger candy bars, or Stouffer’s food products, you are buying from Nestle.

Shell Oil Company is from the Netherlands. BP is a British company.  You may be driving a German car or one from Asia and watching TV on a Korean company product.

In effect, there are more foreign companies than there are American companies. People in most countries have a bias in favor of companies in their homeland. Americans are no different. We tend to ignore much of the rest of the world as our country has many successful companies and we buy what we know.

If you check out the annual returns of the I fund over the past few years, international stocks also tend to be more volatile. If the C fund has a negative return for a year, chances are the I fund will be down even more.

Putting money into the I fund provides greater diversification and can enhance your earnings potential in some years. 2017 is a good example of a good year for the I fund. Those who ignored the I fund in recent years and, instead, put most of their money into the C fund came out ahead. Those who are the most conservative put their money into the G fund and have probably lost money as this fund usually does not keep up with inflation, although it avoids large losses.

In general, ignoring the rest of the world by investing only in American stocks provides less diversification for an investor. In a global economy, those who do not invest in the I fund may want to consider putting some of their money into international stocks through the I fund or the lifecycle funds. The L2050 fund, for example, has about 25% of its investments in the I fund and about 44% in the C fund. The L2020 fund has about 11% of its assets in the I fund and 20% in the C fund.

Stock Market Advances for 8 Quarters in a Row

A number of investors in the Thrift Savings Plan (TSP) follow a “set it and forget it” style of investing. They pick the fund(s) in which they want to invest, many add to it with regular deductions from their paychecks, and let it ride.

That strategy has been working for some time now.

The third quarter of 2017 moved ahead again for stock market investors.

The S&P 500 index has now gone up for eight straight quarters. The last negative quarter for this stock market bellweather occurred in the third quarter of 2015. The SPX index has gone up by about one-third since that time.

No doubt, investors are hoping the trend will continue through the year. The trend is on the side of those wanting to see their TSP stock investments continuing to go up this year. The fourth quarter of the year is usually the strongest quarter. According to Marketwatch, “Since 1950, the S&P gains an average of 3.9% over the quarter, and the final three months of the year are positive nearly 80% of the time.”

October is the Most Volatile Month

For conservative investors who do not like to see rapid change in their stock investments, October is historically the most volatile month of the year for investors.

On the other hand, the overall performance of stocks in October is about the same as most of the other months of the year.

In effect, October is likely to see more significant ups and downs in the market. It does not mean that stocks will start going down or that the long lasting bull market in stocks will end.

Since short-term predictions on stock market moves are usually unreliable, most investors would be well advised to have a plan for their investments, stick with the plan, rebalance their investments periodically to stay with their investment plan, and do not try to buy or sell based on the latest stock market predictions.

Here is a summary of the returns for all of the TSP funds for the month of Septembert, so far in 2017 (YTD) and for the past 12 months.

G Fund F Fund C Fund S Fund I Fund
Month 0.17% -0.48% 2.06% 4.26% 2.52%
YTD 1.73% 3.36% 14.24% 12.76% 20.30%
12 Months 2.23% 0.34% 18.62% 19.15% 19.49%


L Income L 2020 L 2030 L 2040 L 2050
Month 0.60% 1.02% 1.60% 1.87% 2.14%
YTD 4.54% 7.26% 10.47% 12.03% 13.44%
12 Months 5.32% 8.62% 12.40% 14.27% 16.05%

TSP Facts

The Thrift Savings Plan notes that there has been a steady increase in post separation withdrawals from the TSP. The total withdrawals projected for 2017 are 20% higher than for 2016.

As baby boomers decide to retire, the pool of potential people leaving the TSP program is growing. The FERS participation rate dropped from 90.1% in July to 89.9% in August.

The total investments in Roth accounts in the TSP are now over $8 billion—still a small percentage from the overall total of almost $513 billion in the TSP.

Changes in TSP Investments

In August, the G fund gained almost $1.4 billion in interfund transfers. In the same month, almost $1.3 billion was transferred out of the C fund and $578 million from the S fund. The F, I and lifecycle funds all had more than $100 million transferred into those funds in August.

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