Do you remember what kind of investor you were during the dark days of the Great Recession? Did you see the market free fall as a buying opportunity or did you feel like a passenger on the Titanic?

Were you pumping money into the Thrift Savings Plans C, S and I stock funds because you felt they were on sale? Or, like many if not most feds, did you head for the relative safety of the treasury securities G-fund. In short, did you buy high and sell low? Zig when you should have zagged?

The bottom for the federal 401k plan appears to have been in November 2008, when its value slipped to $198.5 billion. In December 2007, it was worth $231.6 billion. It dropped to $202.8 billion in December 2008 then rallied to $236.4 billion in December 2009 as the markets rose.

For point of reference, the TSP is now worth about $437 billion. So obviously, the stock market C, S and I funds have been going up (along with the Lifecycle L-Funds).

My guest yesterday on our Your Turn radio program was Arthur Stein.. He’s a financial planner based in Bethesda, Maryland. Many of his clients are current or former feds, so he knows the TSP. He said the 10-year average annual return for the G-Fund as of December 2014 was 3.2 percent. That compares to 4.9 percent for the F-Fund (bonds), 7.7 percent for the big cap C- Fund, 9.4 percent for the small cap S-Fund and 4.6 percent for the international stock I-Fund.

During our show yesterday, Stein compared 2008 to today. As reference, we used an October 2008 Federal Report column. It said that in September 2008, “166,000 TSP investors pulled billions out of their stock market fund investments and put it into the super-safe treasury securities G-fund. Was that a good move, or are they locking in their losses?”

In most instances, Stein said, they made a mistake,.

So where are they (you) now? He said the economy is OK and apparently getting better. The C and S funds have had “excellent returns” over the last six years. The bond market (F-Fund) has been all right except for 2013. The G-Fund rate of return declined over the last 10 years, he said, “Although there has been some increase in the last two years.”

He said that bond prices are “extremely high and are more likely to decline than increase.” This presents an “unusual amount of risk for the TSP’s F-Fund.”

Stein thinks the markets are due for a “substantial decline (20 percent or more)” although many disagree.

Bottom line: Playing to safe can be costly, even risky. When you get a chance. listen to the entire show, and pass it on to a fellow fed investor. To listen, click here.

Couples Only: Want to know what’s the best health plan, tax and investment strategy for couples? Should a couple buy a family plan or two self-only health plans? Get the answers at a FREE webinar sponsored by the National Institute of Transition Planning. It’s at 2 p.m. EDT today. To register, click here. The webinar hosts are Bob Leins and benefits expert Tammy Flanagan.

NEARLY USELESS FACTOID:

By Michael O’Connell

Max C. Freedman and James E. Myers — the latter using the pseudonym “Jimmy De Knight” — wrote the rock and roll song “Rock Around the Clock” in 1952. The most familiar recording of the song was performed by Bill Haley & His Comets in 1954 for American Decca.

Source: Wikipedia

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