Investors who rely on past performance as an indicator of future returns or losses are, or can be, like a guy driving from New York to California using only his rearview mirror. Or borrowing Magellan’s street map of Detroit: Possible but problematic.
Yet most of us investing-for-retirement types do ponder where mutual funds and markets have been as if that’s a roadmap to the future.
So what would you think about a mutual fund that had losses three years (2000 through 2003) in a row – down 14.17 percent, 21.94 percent and 15.98 percent – followed by five years(2003 through 2007) when it earned 37.98 percent, 20 percent, 13.63 percent, 26.32 percent. Followed, of course, by a loss of 42.43 percent in 2008 and another 30.04 percent in 2009.
What would you call such a fund? Well, if you are a TSP investor you could call it the I-fund.
Last week a reader said he could get no information on the L-fund. Fortunately the TSP website is a goldmine of information, if you know where to look.
The international I-fund is one of the most interesting and complex of all the options available to federal, postal and military investors in the TSP.
It enables investors to buy into companies around the world, like Nestle and Toyota, where markets often rise (and fall) faster than in the U.S.
Most of the holdings of I-fund investors are in Europe (67 percent) in France and the United Kingdom, but also in Austria, Belgium, Denmark, Finland, German, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden and Switzerland.
If you are in the I-fund you’ve also directly invested in companies in Australia and New Zealand, Singapore and Japan.
Being an investor in the world means you can cash in if your company has a big oil, or gold strike and it can hurt when someone in the region (like Iceland) has a volcanic eruption that interrupts air traffic (passengers and cargo) big-time. Or if your new neighbors – the two Koreas, Turkey and Israel – have issues that threaten to ruin the neighborhood.
Many financial planners – advocates of a balanced portfolio – say long-term investors should have some holdings in things like the I-fund. Many caution against having most or all of your retirement nest egg baskets in low-yield funds, like the super-safe Treasury securities G-fund.
But if you look at compounded returns from 2000 to 2009, the G-fund comes in with a boost of 4.62 percent compared to 0.94 percent hike for the C-fund, 1.69 percent gain for the S (small cap) fund and L-fund (first offered in May, 2001) posted a 1.10 percent gain for the period.
The leader, (and one of the least popular funds with investors) is the bond-indexed F-fund which had a compounded 10 year return of 6.39 percent.
Many financial planners have warned investors about having too much in the G-fund. That doing so will handicap trying to keep pace with inflation. But a look at the numbers (past performance) tells, maybe, a different story.
All of this, of course, is 20/20 vision which, when investing, works best based on what actually happened not what we (thought) think is going to happen.
For a snapshot of the I-fund from the TSP (in a pdf), click here.
Gotta run. Mercury is having a sale. This model, I am assured by a long-time dealer, is a sleeper. He says it will soon surpass Ford and Toyota in sales.
And except for the Packard and Edsel things, he’s never been wrong.
Thanks to shrinkage of the TSP, a growing number of people are asking if they can afford to give up a steady, good paying government job for retirement. At 10 a.m. today (EDT) on the For Your Benefit show a panel of experts talks about how you can go into retirement without substituting cat food for steak. Listen in. Can’t hurt and might help a lot.
Eight percent of Americans believes there is a chance that Elvis Presley is still alive.
ADDITIONAL PAY AND BENEFITS NEWS ON FEDERAL NEWS RADIO TSP Snapshot: What goes up does go down < ?nid=35&sid=1974222> Feds with retirement funds in the Thrift Savings Plan know that May was a rough month for your money. But it’s not time to panic. Paul Yurachek from Ameriprise Financial Services in Bethesda analyzes a rollercoaster month for the TSP with reporter Max Cacas for our monthly feature, “TSP Snapshot”. To read more, click here.
ALSO ON FEDERAL NEWS RADIO Monday Morning Federal Newscast Among headlines this morning on Federal News Radio: Boeing Plans Bid on Presidential Helicopter Fleet, State Dept. plans Maryland training site, GSA seeks to recover WPA artwork. Learn more from the Morning Federal Newscast by clicking here.
Federal contracts: How many is too many? We’ve been covering the debate about whether there are too many government contracts. DorobekInsider talks with Steve Kelmen, a professor at Harvard’s Kennedy School and the former Office of Federal Procurement Policy administrator, about this important issue. Read more here.
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Dorobek Must Reads – June 4 Worried you’ll have no idea what people are talking about around the watercooler this morning? Each day, the DorobekInsider team collects a group of stories that we’re reading to stay in the know. On Friday: the Navy CIO discusses what he’s learned from industry, and we tell you about the top 5 worst pick up lines at work. Read more here.