C Fund Drops Fast
The C Fund in the Thrift Savings Plan (TSP) hit its low point for the year on March 23rd. At the close of business on that date, the C Fund price was about $32.85. On December 31, 2019, the C Fund price was $47.26. In effect, between the last day of 2019 and the closing price of the C Fund on March 23rd, the C Fund lost more than 30% in value.
The C Fund has been going up since March 23rd.
How did investors in the TSP react to the big drop in stock prices?
$15 Billion Transferred to G Fund
In March, TSP investors transferred more than $15 billion into the G Fund. How much of this $15 billion was transferred into the G Fund before and after March 23rd, we do not know. Based on past history of how investors reacted in significant stock downturns, it is likely that a significant portion of the $15 billion was transferred around March 23rd.
$15 billion is a great deal of money. On the other hand, at the end of March, the TSP had about $557 billion so the $15 billion is a small percentage of the overall number. According to the TSP, about 93% of investors did not take dramatic action in buying or selling their TSP investments.
But, if you are a TSP participant and you moved a significant portion of your money from the C Fund (or the S or I Funds for that matter), you sold your stock at a low price. The stock fund prices could go lower, of course, before the market settles down and America returns to a semblance of normality.
What often happens is that a person watches the balance in a stock portfolio decline quickly over a few weeks or months. When that happens, there is a strong emotional reaction. Some investors decide they cannot afford to lose any more money and they will sell all or a good portion of their stock investment.
As noted above, that is not unique to the current environment. It always happens when stock prices drop quickly. But, the fact that 93% of TSP investors essentially left their investments alone is a good sign in that these investors are likely not to have sold their TSP stock funds at what may turn out to be the low point of the 2020 bear market.
Comparing TSP Investor Allocations
Here is how TSP investor allocations have changed in the Thrift Savings Plan since the end of 2019:
|% of Investments
|% of Investments
Obviously, the percentage of investments in the G Fund has gone up dramatically. Investments in the F Fund have gone up slightly while the percentage of investments in all of the TSP stock funds is down.
Transferring Out of Lifecycle Funds
Perhaps the biggest surprise is investments in the Lifecycle Funds. More than $6 billion was transferred out of the Lifecycle Funds in March 2020. That is surprising in that an L fund is designed to fit the projected retirement date of an investor with a mixed percentage of stocks and bonds. Obviously, some L fund investors moved their money out of the L funds–perhaps because the more aggressive funds were going down because of the high level of stock investments.
We do not know how many of these investors lost money by moving money into the G Fund and out of the L funds which have rebounded since the low point in March. As of this writing, the C Fund is still down about 11% for the year-to-date.
The April results for all of the TSP funds will be available on May 1st. Stay tuned for the lastest results!