32% Return in One TSP Fund in 5 Months

During a year of extremes, TSP investors have seen a return of more than 32% in the past five months in this leading TSP fund.

U.S. stocks just finished their best month since April. The monthly returns for August continued an extraordinary rally fueled by stimulus money pouring from the federal government, signs of economic revival and apparent progress toward a coronavirus vaccine.

Best TSP Returns for August

The C Fund in the Thrift Savings Plan (TSP) advanced 7.19% and the S Fund went up 7.20% in August. The 7.20% return is the best return for August among all of the TSP Funds.

This is the fifth month in a row that the C and F Funds have provided positive returns for investors. The C Fund has ranged from a return of 12.81% in April (after falling 12.4% in March) to its lowest monthly return of 1.99% in June.

32.39% Return for C Fund in 5 Months

Dismal returns for stocks in February and March ended the longest bull market on record. The S&P 500 stock index (the index on which the C Fund is based) has gone up 35% in the past five months. The Wall Street Journal reports that this is the largest five-month percentage gain since 1938. The C Fund has gone up about 32.39% in this same five-month period—an extraordinary event in any year.

Any TSP investor that held on to their TSP stock funds and invested additional amounts in the C and F Funds when the funds hit their lowest point in March has realized a very good return.

Best Year-To-Date Returns

Which TSP Fund has the best rate of return so far in 2020?

Despite dramatic ups and downs so far this year, most of the TSP Funds have a positive return in 2020. The exception is the I Fund which is showing a loss of -4.35% so far this year.

At the other end, the C Fund has a return rate of 9.67% and the S Fund has a return of 6.70% for 2020.

Best 12-Month Returns

For the past 12 months, the figures are even better. The C Fund has a return of 21.83% in the past 12 months and the S Fund has returned 17.36% over the past 12 months.

Return Rates for All TSP Funds

G FundF FundC FundS FundI Fund
12 Month1.29%6.37%21.83%17.36%6.45%
L IncomeL 2025L 2030L 2035L 2040
12 Month5.02%n/a10.71%n/a12.38%
L 2045L 2050L 2055L 2060L 2065
12 Monthn/a13.75%n/an/an/a

The Chairman of the Federal Reserve, Jerome Powell, helped stock returns last week by announcing a shift in the central bank’s approach to monetary policy. While there may be concerns about inflation taking off as the economy recovers, the Chairman’s announcement erased concerns that the Federal Reserve would raise interest rates to dampen inflation in the near future.

That is good news for many companies and may help provide better stock market returns in the coming months.

The Dow Jones Industrial Average (DJIA) went up 7.6% in August. The S&P 500 gained 7%. These August 2020 returns are in the top 6% to 7% of monthly returns. A monthly gain of 7% to 10% is outstanding in any year.

In fact, the DJIA had its best August returns since 1984. The S&P 500 return was its best August return since 1986. It would not be a big surprise if the stock market has a negative return for September after the big run we have seen in the last five months.

But, according to one financial reporting service, when stocks are successful in August, stocks usually go up through the end of the year. After sizable August returns, the DJIA has averaged a return of 12% from September through the end of the year. The S&P 500 has gone up 11% through the end of the year.

2020 has been a year of significant events. The COVID-19 pandemic and rioting and protests in some American cities are unsettling for many Americans. While it may not be a coincidence that the social unrest is occurring in the midst of a presidential election year, the political implications of the uncertainty are difficult to predict. The impact of these events on stock market returns are also uncertain.

For now at least, TSP investors can feel good about the financial returns they are seeing on their investments that will help fund their future retirement. We wish all FedSmith readers the best in achieving their financial goals during the rest of this unusual year.

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