TSP investing during a growing pandemic: How’s that work?

Investing for retirement is tricky enough. Building and keeping a nest egg for life when three virus strains are ravaging the planet only adds to the stress. But many pros say that even in times like this there are things people can do to get the best returns. Earlier this year we asked D.C. area financial planner Arthur Stein how his investors were holding up. And what course he was advising them to take. We got so much reaction we’re going to rerun the Your Turn show today at 10 a.m. streaming here or on the radio at 1500 AM in the Baltimore-Washington area.

For background, and to setup what we’ll be talking about today, he’s written this do’s and don’ts for long range TSP investors. Here’s a look at what we’ll be talking about:

Stock Funds: Covid, Inflation, and Supply Chain Disruptions

By Arthur Stein, CFP®

The TSP U.S. stock funds (C and S) reached all-time highs in the last week of October, as stock investors seemed to focus on a resilient economic recovery, ongoing historic support from the Federal Reserve and strong corporate earnings. Year-to-date returns were excellent for all three of the stock funds.

F fund (intermediate-term US bonds) returns continue to be negative year-to-date and over the last twelve months. However, the F fund outperformed the G fund (short-term government bonds) over the last 5, 10 and 15 years.

A Frequent Question with No Answer

One of the most frequent questions I hear is how well the TSP funds will do in the future. I cannot answer that.

Stock market forecasts are not reliable, not by me or anyone else. An article by Barry Ritzholtz in the Washington Post, Would you let a mystic manage your investment portfolio?, contains many examples of failed stock market predictions. Ritzholz writes that the “data overwhelmingly show that the skill set of the predictive pundits is no better than a coin toss. The odd person gets these forecasts about the economy and stock markets right each year, but the lack of any sort of consistent winners and losers means that, mathematically, it is a random outcome.”

Old saying: Even a stopped clock tells the correct time twice a day.

So, what can an investor do? I suggest ignoring market forecasts. Instead, note that, historically, well diversified and well managed stock portfolios outperformed bonds and bank accounts over long periods of time. That means that the TSP stock funds are reasonable investments for money you need to withdraw more than ten years from now. Past performance is no guarantee of future performance but the historical record seems clear.

Nearly Useless Factoid

By Alazar Moges

17 of the 20 highest peaks in the United States are in Alaska. Denali is the highest peak in North America at 20,320 ft.

Source: Alaskan Government

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Jan 24, 2022 Close Change YTD*
L Income 23.0998 -0.004 5.42%
L 2025 11.8788 -0.0041 9.75%
L 2030 41.7457 -0.0202 12.37%
L 2035 12.5177 -0.0065 13.43%
L 2040 47.2981 -0.0258 14.51%
L 2045 12.9364 -0.007 15.40%
L 2050 28.3038 -0.0157 16.34%
L 2055 13.8741 -0.008 19.90%
L 2060 13.8738 -0.0081 19.90%
L 2065 13.8737 -0.0081 19.90%
G Fund 16.7539 0.0022 1.38%
F Fund 20.5114 -0.0212 -1.46%
C Fund 66.6178 0.185 28.68%
S Fund 74.2811 1.2775 12.45%
I Fund 37.7682 -0.4925 11.45%
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.