Stock Market Down for 3rd Month: Where is the Best TSP Performance in 2023?

The stock market is down for the 3rd month in a row. Federal employees must look at the bigger picture to see the best TSP performance in 2023.

TSP Performance in October 2023

The stock market ended October with stocks declining in value for the third month in a row. For October, all TSP Funds, including the Lifecycle Funds, were down except for the G Fund. The G Fund was up 0.40% for the month, 3.40% so far in 2023, and up 4.10% over the past twelve months.

It has been a rough three months for stock market investors. Here is how the TSP’s core funds have fared in the last three months:

G Fund0.40%0.35%0.35
F Fund-1.58%-2.54%-0.63%
C Fund-2.10%-4.77%-1.58%
S Fund-6.26%-4.90%-4.06%
I Fund-3.22%-3.51%-3.90%

TSP Returns: Looking at the Bigger Picture

Despite this bleak scenario, the news is not all bad.

For the year-to-date and the past 12 months, most of the TSP Funds are showing positive returns. The only exception is the F Fund. This TSP Fund is up 0.34% over 12 months but it is down 2.61% for the year-t0-date.

Why is the F Fund Down?

The F Fund tracks a broad, diversified index of bonds.

When market interest rates rise, the value of F Fund shares will usually fall. When interest rates go down, F Fund shares will often go up. The effect of rising interest rates is offset, to some extent, by the interest payments that are periodically received from the bonds and add to the value of shares in the F Fund.

The Federal Reserve has been increasing the interest rate to bring inflation down to about 2%. That goal has not been met but the inflation rate has gone down as interest rates have gone up. The F Fund has not fared well in this environment.

The G Fund is different from the F Fund. The G Fund is a unique investment fund available only to TSP participants. The G Fund is invested in short-term U.S. Treasury securities that are issued to the TSP. The U.S. government guarantees payment of principal and interest.

Thus, there is no “credit risk.”

On the other hand, when stock market prices are going up, the G Fund’s performance will lag the stock market. Long-term investors generally have better long-term results by investing in stocks. The G Fund provides a measure of safety in a TSP investment portfolio. As the current market demonstrates, the G Fund is going up while stock funds are going down. To a retired federal employee, this measure of safety can be very important.

The G Fund interest rate is calculated by the U.S. Treasury as the weighted average yield of approximately 183 U.S. Treasury securities on the last day of the previous month. The yield of the security has a weight in the G Fund rate calculation based on the amount outstanding.

Depending on recent market performance, the G Fund is often the most widely held TSP Fund. In recent years, when the stock market was generally going up, the C Fund was the most widely-held TSP Fund.

Where are the Best TSP Returns in 2023?

It is human nature to look at the most recent events and extrapolate from that information. Based on the most recent data, the G Fund should have the best return in 2023.

But, look more closely at the stock market returns, and a different picture emerges. The G Fund has been the best-performing TSP Fund in some months—especially in the last three months. For the year-to-date, the C Fund still provides the best return for TSP investors.

The C Fund is up 10.67% so far in 2023. For the past 12 months, the C Fund is up 10.10%. TSP investors who avoided the stock market and put all of their money into the G Fund may have slept better, but they did not make the most money.

So far in 2023 and over the past 12 months, most of the TSP Funds, including the Lifecycle Funds, have provided higher returns than the G Fund. In fact, the best-performing L Funds are those with the highest percentage of stocks.

TSP Performance for October 2023, 12 Months and Year-to-Date

FundOctober 2023Year-to-Date12-Month
G Fund0.40%3.40%4.10%
F Fund-1.58%-2.61%0.34%
C Fund-2.10%10.67%10.10%
S Fund-6.26%2.03%-1.23%
I Fund-3.22%3.49%15.51%
L Income-0.56%4.07%5.62%
L 2025-0.90%4.80%6.81%
L 2030-1.77%5.42%7.99%
L 2035-1.99%5.56%8.30%
L 2040-2.20%5.73%8.62%
L 2045-2.39%5.85%8.87%
L 2050-2.57%6.01%9.15%
L 2055-3.04%6.98%10.38%
L 2060-3.05%6.97%10.38%
L 2065-3.05%6.97%10.38%

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