Your TSP and the Coronavirus

February 3, 2020 11:40 AM , Updated February 17, 2020 7:44 AM
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Experienced investors know unexpected events will pop up that will have an impact on the price of stocks and bonds. We are now in the midst of such an event.

American stocks experienced a rough January with the S&P 500 index (the index on which the Thrift Savings Plan’s C Fund is based) falling more than 3% from its all-time high on January 17.

The unexpected event that has captured headlines is the emerging danger of the coronavirus and its potential impact on global economic growth. That potential impact has had an impact on stock prices.

The end of January was hectic for investors in foreign and domestic markets. There are a number of corporate earnings reports coming out at this time, central-bank decisions emerging and government economic data all coming out in the midst of concerns about the epidemic. The outbreak will cut U.S. economic growth by 0.4 percentage point in the first quarter of the year.

And, not surprisingly, the C Fund went down .04% in January. The C Fund per share price was at $47.26 on December 31st, $48.74 on January 17th and down to about $47.24 on January 31st — in large part because of the unknown impact of the virus and its spread around the world.

The volatility in stocks is caused in large part by fear of the unknown. Will the virus continue to spread and will it prove to be deadly to a large number of people? Will the virus prove to be much less deadly than feared? Will a medical cure be quickly found that significantly reduces the potential danger?

Since no one knows what will happen, stock prices dropped as investors priced in their fear of the financial impact the disease could create.

Obviously, the Thrift Savings Plan (TSP) is not immune to any of this and returns for the month reflect these events.

Bond Funds Ahead in January

The TSP fund with the best return in January was the F Fund which advanced 1.91%. This fund is now up 9.59% for the past twelve months. The G Fund was also up with a return of 0.17%.

The fund with the lowest performance was the I Fund which declined 2.73% in January. The S Fund was also down (0.62%) and the C Fund was down 0.04%.

For the past 12 months, all of the stock funds still show a solid return. The C Fund still leads all of the TSP funds over the past 12 months with a return of 21.65% while the S Fund has given investors a return of 13.92% and the I Fund is up 11.76% over this time period. For comparison, the G Fund is up 2.17% over the past twelve months.

Here is how all of the funds in the Thrift Savings Plan have fared for the past month, the year-to-date and for the past 12 months.


G Fund F Fund C Fund S Fund I Fund
Month 0.17% 1.91% -0.04% -0.62% -2.73%
YTD 0.17% 1.91% -0.04% -0.62% -2.73%
12 Month 2.17% 9.59% 21.65% 13.92% 11.76%

L Income L 2020 L 2030 L 2040 L 2050
Month 0.01% -0.02% -0.45% -0.59% -0.71%
YTD 0.01% -0.02% -0.45% -0.59% -0.71%
12 Month 5.67% 6.66% 11.58% 13.34% 14.79%

The Market Will Drop…Or Will Go Back Up

Experienced investors know that investing in stocks provides a good long term return to aid in providing income for your future retirement. There are usually significant declines along the way and predicting the timing and extent of these declines if often a futile effort.

Many TSP investors try to diversify their portfolio with a mix of stocks and bonds (or investing in a lifecycle fund) to cushion the inevitable and occasional unpredictable decline in stock prices.

Those who read the financial news will see predictions that the temporary decline in stock prices as a result of fear over the spread of a new virus is a good time to invest more in stocks. They will also read predictions that current events are just the beginning of a significant drop in stock prices before any substantial gains.

Trying to predict the future can be a stressful exercise in futility. TSP investors who keep investing on a regular basis, do not panic, and have a diversified portfolio with which they are comfortable usually come out ahead—and may eventually join the growing number of TSP millionaires.

We wish all of our readers the best of luck in growing their TSP portfolios in the coming months.

© 2020 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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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

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