Which TSP Fund Up 8.65% in 12 Months?

How did the TSP funds perform in June? The best performing fund in the last year may surprise you.

For those who casually watch the rate of return for the funds in the Thrift Savings Plan (TSP), this may be a surprise.

F Fund Has Best Return Over 12 Months

Which TSP Fund has the best return over the past 12 months? With all of the volatility and unexpected changes in stock prices this year, some readers may be surprised to see that the TSP fund with the highest overall return is the F Fund.

Some investors probably see the F Fund as a staid and stodgy bond fund. But the reality is that this fund has provided an overall return of 8.65% over the past twelve months. That is the highest return for any of the TSP funds during this time period.

The F Fund also had an annual return in 2019 of 8.68%. That is a good return but many investors probably looked at the 31.45% return from the C Fund or the 27.97% return from the S Fund and dismissed the F Fund as a lower quality investment.

F Fund Returns Can Be Very Good

The reality is everyone tends to look at recent history and assume that will be repeated in the near future. The F Fund has been stodgy in recent years as the bull market has roared. But, way back in 1995, the F Fund had a return of 18.31%. It also had a return of 15.75% in 1991 and 13.89% in 1989.

We do not know how this bond fund will fare in coming months but the recent high returns for the F Fund provide a good argument for having diversity in TSP fund investments. With the large spending stimulus in 2020, there is a possibility of inflation returning as a new reality. If that should occur, bonds could turn out to be a wise investment.

The C Fund is not far behind the F Fund over the past twelve months. Over this time frame, it has provided investors with a rate of return of 7.41%. None of the other funds come close to these two funds.

The fund with the lowest rate of return over the past twelve months is the I Fund. It is down 4.62%—the only TSP fund with a negative rate of return for this time period.

Returns for All TSP Funds

Here are the results for all TSP Funds for June, the year-to-date and the past 12 months:

G FundF FundC FundS FundI Fund
12 Month1.54%8.65%7.41%0.84%-4.82%

L IncomeL 2020L 2030L 2040L 2050
12 Month2.52%2.36%2.95%2.96%2.86%

Just three months ago, many stock investors were unhappy with the end of the bull market—and the longest economic expansion on record—after major U.S. stock indexes lost about 35% of their value in a few weeks. 

Best Quarterly Return in 20 Years

In a very volatile year, lamenting the end of the bull market is now history. In the latest quarter, despite dramatic ups and downs, stocks just finished up their best quarter in more than 20 years. In effect, there has been a significant rally after the coronavirus scare brought business around the world to a standstill and, of course, many Americans found themselves without a job and staying at home.

The S&P 500 index, the index on which the TSP’s C Fund is based, went up 20% in the second quarter of this year. The C Fund had a similar performance since March 31 with a gain of must over 20%.

Check out the rates of return for the TSP funds in April, May, and June after the dramatic drop in stock values back in March. As it looks right now, investing in March, when fear was gripping stock prices, was a good time to put more money into stocks.

What Happens Next?

For those who follow history as a guide, what will happen next with stock prices?

With a surge in coronavirus cases, continuing riots and protests, and a large continuing number of Americans filing for unemployment, and an upcoming presidential election, predicting the future of stock prices is essentially a guess.

Here is a statistical calculation from MarketWatch: “Following the top 10 best quarters since 1950, the index has climbed every time in the next quarter with an average 8% jump.” So, if history is any guide, the next quarter may provide investors with a very good rate of return.

But, of course, history is not always a clear guide. The broad S&P 500 index was higher one year later following nine out of the 10 best quarters. The 1987 stock market crash was the one exception.

Will the current situation and uncertainty be another exception in stock market returns? We will be sure to let readers know when the results are in. FedSmith won’t be making any predictions in future stock prices though.

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