Which TSP Fund Is Up More Than 31% in 12-Months?

One TSP Fund is up more than 31% in the past 12 months. Here are the latest returns for the month, so far in 2021 and the past year. How do your investments compare?

C Fund is Roaring—Top TSP Core Fund in 2021

August was another good month for Thrift Savings Plan (TSP) investors. The S&P 500 index fund finished close to an all-time high and it was up about 3% for the month. As this index fund is the one on which the C Fund is based, the C Fund did well also. The C Fund was up 3.03% in August—the highest return of any core TSP Fund for the month. August was the best month for the C Fund since it returned 5.33% in April.

For those with a substantial amount of their TSP investments in the C Fund, there is more good news. The C Fund is up 31.13% over the past 12 months and up 21.56% so far in 2021.

The stock market, and the C Fund, have been rocketing up. The C Fund had a return of 18.31%, and 31.45% in 2019.

To put this into perspective, the S&P index has been in existence since 1926. The average annual return of the S&P since adopting 500 stocks into the index in 1957 through 2018 is about 8%.

For the C Fund, the 10-year average return through July 2021 has been 15.37%.

These average returns are very good. To put this into perspective, there are also years in which the stock market has tanked. Those that kept their money invested—despite the market dropping—have done well. Human nature being what it is, many investors (probably most) often sold their investments when the stocks dropped dramatically. The result is that most investors have not enjoyed the higher “average” returns of the S&P index.

S Fund Has Highest Return for 12-Month Period

The small company fund in the TSP (the S Fund) had a return of 43.73% over the past 12 months. That sounds like a return for a hedge fund rather than the more conservative TSP Funds. No doubt, the S Fund has been a very good provider for TSP investors willing to take the higher risk associated with small company funds.

The S Fund is also up 2% in August and has the second-highest return (after the C Fund) for the highest TSP core fund return in 2021 (16.31%).

LifeCycle Fund TSP Returns

With the stock market still booming, for now, the more aggressive TSP Funds are doing very well for investors. The three Lifecycle Funds for investors with the longest extended retirement projections (L 2055, L 2060, and L 2065 each have a 12-month return of 31.27%. For the year-to-date, these three funds are up 17.18%.

Here are the returns for all of the TSP Funds for August, the past 12 months, and the year to date (YTD):

G FundF FundC FundS FundI Fund
12 Month1.15%0.12%31.13%43.73%26.32%
L IncomeL 2025L 2030L 2035L 2040
12 Month7.37%14.67%18.54%20.37%22.22%
L 2045L 2050L 2055L 2060L 2065
12 Month23.85%25.50%31.27%31.27%31.27%

Potential Danger in Stock Market Returns

There is always risk in the stock market. This is particularly true when indices tracking the stock market are reaching new highs or close to that benchmark.

Currently, while it is sounding like an old record, the COVID virus is still an unknown factor. The contagious Delta variant has many people on edge. If this fear translates into consumers reducing their spending dramatically or new restrictions being imposed on businesses, the economic recovery could dramatically turn around. This would be reflected in stock market returns. In the past week, consumer confidence in the United States went down to its lowest level since February. That is not necessarily a prediction of what the economy will do in the short term but it does indicate that the uncertainty and panic by individuals and governments surrounding COVID is still with us and still could have a major impact on investments.

Additionally, events in Afghanistan have dominated headlines in the past week. No one knows if the American retreat from Afghanistan will lead to more terrorist attacks and growing concerns here and globally about the danger posed with any resumption of terrorist activity in the coming weeks or months.

So, as usual, there is unpredictability in short-term stock market predictions.

History cannot predict what is going to happen in the future but looking back pretty much every time something happens and rocks the markets, people are out there saying: ‘This time it’s different. The market can’t hold on with this crisis,’ yet time and time again despite new crises happening we see markets rebound and recover.

Investing During a Pandemic – Carol Schmidlin – 8/20/2020

TSP investors are experiencing a long period of very good stock market returns. That is a blessing for those who are retired or will be retiring in the near future as higher returns provide a greater retirement income. For those with a current rosy outlook and high expectations for the future, this may be a good time to evaluate your investment portfolio and to consider “what if” scenarios should there be a drop in the stock market.

In effect, enjoy the tremendous surge in stock prices in recent years. At the same time, consider your own probable reaction to any sudden drop and invest accordingly so that your emotional reaction will not lead to taking dramatic steps when the market dips again—and it always dips at some time in the future.

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