January 2007 - EAFE Stock Index Returns

[budnipper1]

My question relates to the method used by the TSP fund Administrators to calculate the actual monthly returns of the individual funds. (Specifically, the I-Fund)

Why didn't the I-Fund return equal the EAFE index for the month of January 2007, as it did in the previous 12 months in 2006? When I review the monthly I-Fund returns for 2006 on the official TSP site, http://www.tsp.gov/rates/returns-tsp.html , it is obvious that those returns almost exactly match the EAFE index numbers each and every month. But, the monthly return for the EAFE in January 2007 is shown to be .68%, while the return for the I-Fund was 1.31%. How did the I-Fund merit a return that is nearly double the EAFE index for January, 2007.

Since I have not previously posted on any tsptalk message board, I am unsure as to where I should have posed my question. I apologize, in advance, if this is the incorrect place. I have been reading the various message boards for a few months, but have no recollection of any previous postings relevant to this specific question. I attempted to use the "Ask Tom" link yesterday, but my question has not yet been answered. Maybe it takes longer than I expected. Again, I'm new at this game. Thanks, in advance, for all responses.

 

[tsptalk]

Welcome budnipper. Here's a link to a thread that may help. Check out post by Griffin (post #6 in this link)... http://www.tsptalk.com/mb/showthread.php?t=3868

If you look at the different subjects in the I fund forum, you are bound to find your answer as this has been asked many times.

Good luck!

 

[Wheels]

My question relates to the method used by the TSP fund Administrators to calculate the actual monthly returns of the individual funds. (Specifically, the I-Fund)

Why didn't the I-Fund return equal the EAFE index for the month of January 2007, as it did in the previous 12 months in 2006? When I review the monthly I-Fund returns for 2006 on the official TSP site, http://www.tsp.gov/rates/returns-tsp.html , it is obvious that those returns almost exactly match the EAFE index numbers each and every month. But, the monthly return for the EAFE in January 2007 is shown to be .68%, while the return for the I-Fund was 1.31%. How did the I-Fund merit a return that is nearly double the EAFE index for January, 2007.

Since I have not previously posted on any tsptalk message board, I am unsure as to where I should have posed my question. I apologize, in advance, if this is the incorrect place. I have been reading the various message boards for a few months, but have no recollection of any previous postings relevant to this specific question. I attempted to use the "Ask Tom" link yesterday, but my question has not yet been answered. Maybe it takes longer than I expected. Again, I'm new at this game. Thanks, in advance, for all responses.

If you have read through some of the other threads on the I fund, you have seen us discuss the fair valuation process (we call it FV) that Barclays sometimes applies to the price of the I fund. This is done when there have been large movements in either the U.S. markets or a large move in the dollar AFTER European market have closed (after noon). These large movements are not reflected in the EAFE figure for the day but they are estimated into the price of the I fund in anticipation of what will take place the next day. These fair valuation adjustments must be corrected within a day or two because as you say, the price of the I fund has to match the value of the EAFE. In this instance, Barclays adjusted the price of the I fund on Jan 31st. The EAFE went down .211% but the I fund went up 9 cents. It was corrected the next day, February 1st. But that correction has not been tallied in the monthly figures yet. It will all come out in the wash in the February figures assuming there is no adjustment on the last day of February as well.

Clear it up for you?

 

[budnipper1]

Thank you Dave and Tom, for your explanations. After I posted my question, I browsed though many of the previous discussions about the EAFE and the FV, and began to understand a little more. That however, does not mean that all is crystal clear to me now, but it does help me accept the fact that I'll probably never fully understand every aspect of the how the market world works. Hopefully, after a while, some of this will sink in and make more sense to me.

On a positive note, I have no trouble understanding the daily variations, or differences between the returns of the EAFE index vs. the I-Fund. Maybe, after watching those numbers change from now through the first week of March, I'll also begin to understand how their monthly averages for January were so different from the previous year. My bottom line is that I need to learn enough to prevent a reoccurrence of what happened to my TSP money in 2000-2002 without simply hiding out in the G-Fund.

 

[Show-me]

EAFE is not the I fund it only tracks the I fund so there will be variations.

 

[Wolverine]

EAFE is not the I fund it only tracks the I fund so there will be variations.

So, the EAF symbol I punch in at stockcharts is not actually the I fund, it is just a tracker of it?

None of the TSP funds have their own charts then?

I just want to clear this up is all.

Thanks

 

[Spaf]

Wolverine,
See the funds discription at www.tsp.gov they use the term "match the performance of.......". So the F-fund is not [AGG] but very close. I haven't found a match for the G-fund, but there are close matches to the C, S, and I funds. Some have regular stock matches and also ETF matches i.e., C-Fund = stocks S&P500 [GSPC][$SPX] = ETF [IVV].

 

[Wheels]

On a positive note, I have no trouble understanding the daily variations, or differences between the returns of the EAFE index vs. the I-Fund. Maybe, after watching those numbers change from now through the first week of March, I'll also begin to understand how their monthly averages for January were so different from the previous year. My bottom line is that I need to learn enough to prevent a reoccurrence of what happened to my TSP money in 2000-2002 without simply hiding out in the G-Fund.

Again, the monthly variation in this case was simply because the daily variation happened on the last day of the month. The February variation should be in the exact amount in the other direction.

Amen on the 2000-2002 thing. That is why I do this. If I had stepped aside for a significant portion of that downturn, I would have a staggering balance today.

 

[Wolverine]

Thanks Spaf........I think I got it understood with what you are saying here. Just making sure I got the brain cells working right in that direction. LOL

Yes, interesting also, that I haven't seen anybody present somekind of tracker/chart of the G fund. Must not be that important. lol

Anyhoo, thanks for the info with this.

 

[VirginiaBob]

The G-fund doesn't really need a tracker since it pays at a relatively constant rate. Every 4-6 days, it gains a penny. Lately, it has been every 5 days.

 

[Spaf]

Amen on the 2000-2002 thing. That is why I do this. If I had stepped aside for a significant portion of that downturn, I would have a staggering balance today.

Dave,

Right!

Refresh my memory, back in 1999/2000 was there any one saying get out of tech stocks? Or this thing is going to bust, so go to some safe funds, etc, etc.
All I remember is folks were buying like mad!
I was with one of the leading mutual fund companies, and no one advised me of any caution.....

Thats why I think this site is so good, it teaches responsibility. And you get to practice dodging the pullbacks, so when the biggie comes you have a better chance.

Spaf