Alligators, the law of averages, and your TSP account

When tracking the performance of a team (Go Nats!) or a baseball player, averages are both interesting and often very helpful. When crossing a crocodile-infested river, or investing in the Thrift Savings Plan, not so much!

Most of the people with big TSP account balances have done the same two things: they’ve been investing steadily for decades and most of their investments, through good times and bad, have been in the stock indexed C, S and I funds. The C fund tracks the S&P 500. The small cap S fund tracks the rest of the U.S. stock market. The I fund is invested in international stocks. They go up and down. During the Great Recession of 2008-09, they got hammered. But people who stuck with them and continued to buy shares saw their accounts soar during the recovery.

While many investors, young and old, favor the treasury securities G fund, their number two choice is the C fund. Over the years from 1993 to 2018, the C fund has averaged 10.6%. That’s super good. But because its an average, a deeper dive year-to-year comparison shows that in only three years — 1993, 2004 and 2016 — it actually averaged between 10 and 12%. In between those years it was all over the place being up over 30% and down more than 30% in 2008, the year everybody wants to forget. Conclusion. Your call?

Last week financial planner Arthur Stein talked about surviving the next bear market on our Your Turn radio show. During that show he also pointed out that while the popular C fund’s average annual return was approximately 10.6%, that average return doesn’t reveal the volatility of the returns. Meantime, as most investors realize, the stock market has been on a 10 year run and is long overdue for a major decline of 20% or more. Maybe lots more. Some TSP investors believe it’s already started.

As a followup to that show Stein developed this chart which shows the yearly performance of the C fund through 2018. It is fascinating to track the ups and downs. Check it out, and thanks again to Art:

Nearly Useless Factoid

By Alazar Moges

Halloween is just around the corner, and you know what that means — candy! One of the most beloved candies is peanut M&Ms. But guess who has never had one? The man credited with inventing them. Forrest Mars, the founder of Mars, Inc. had a severe nut allergy so he couldn’t even eat the popular treat he created.

Source: Mashed

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THRIFT SAVINGS PLAN TICKER

May 17, 2021 Close Change YTD*
L Income 22.8151 -0.0054 2.39%
L 2025 11.6860 -0.0067 4.76%
L 2030 41.0703 -0.0315 6.01%
L 2035 12.3136 -0.0105 6.56%
L 2040 46.5211 -0.0433 7.12%
L 2045 12.7268 -0.0127 7.60%
L 2050 27.8442 -0.0297 8.10%
L 2055 13.6259 -0.0171 10.05%
L 2060 13.6258 -0.0171 10.05%
L 2065 13.6256 -0.0171 10.05%
G Fund 16.5859 0.002 0.40%
F Fund 20.6287 -0.0108 -2.55%
C Fund 62.3067 -0.1576 11.83%
S Fund 80.3681 -0.1472 12.34%
I Fund 38.2871 0.0296 6.73%
Closing price updated at approx 6pm ET each business day. More at tsp.gov
* YTD data is updated on the last day of the month.