By Ralph Smith
Tuesday, August 2, 2011
Investors in the Thrift Savings Plan have now seen their stock investments going down for the third straight month. (See all of the most recent and historical TSP fund monthly returns in the TSP Corner.)
Here are the results for July:
Here is a chart displaying the results for the TSP funds for July and for the year-to-date:
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<script type="text/javascript">var $oString = new StringBuilder();$oString.append("<chart caption='July 2011 TSP' xAxisName='Fund' yAxisName='Rate of Return' numberSuffix='%25' numberPrefix='' exportEnabled='1' exportHandler='/images/fusionCharts/ExportHandlers/PHP/FCExporter.php' exportAtClient='0' exportAction='download' rotateLabels='0' slantLabels='0' showValues='1'>\n");$oString.append("<categories>\n");$oString.append("<category label='G Fund' />\n");$oString.append("<category label='F Fund' />\n");$oString.append("<category label='C Fund' />\n");$oString.append("<category label='S Fund' />\n");$oString.append("<category label='I Fund' />\n");$oString.append("</categories>\n\n");$oString.append("<dataset seriesName='July Return'>\n");$oString.append("<set value='0.22' />\n");$oString.append("<set value='1.59' />\n");$oString.append("<set value='-2.04' />\n");$oString.append("<set value='-3.14' />\n");$oString.append("<set value='-1.60' />\n");$oString.append("</dataset>\n\n");$oString.append("<dataset seriesName='Year-to-Date'>\n");$oString.append("<set value='1.66' />\n");$oString.append("<set value='4.39' />\n");$oString.append("<set value='3.85' />\n");$oString.append("<set value='3.81' />\n");$oString.append("<set value='3.59' />\n");$oString.append("</dataset>\n\n");$oString.append("</chart>\n");var myChart = new FusionCharts("/images/fusionCharts/MSColumn3D.swf", "July2011", "450", "375", "0", "0");myChart.setDataXML($oString.toString());myChart.render("July2011");</script>The L funds show a similar result and they are down for the third straight month as well. Here are the results for these funds for July and the year-to-date:
<script type="text/javascript">var $oString = new StringBuilder();$oString.append("<chart caption='July L Funds' xAxisName='Fund' yAxisName='Returns' numberSuffix='%25' numberPrefix='' exportEnabled='1' exportHandler='/images/fusionCharts/ExportHandlers/PHP/FCExporter.php' exportAtClient='0' exportAction='download' rotateLabels='0' slantLabels='0' showValues='1'>\n");$oString.append("<categories>\n");$oString.append("<category label='L Income' />\n");$oString.append("<category label='L 2020' />\n");$oString.append("<category label='L 2030' />\n");$oString.append("<category label='L 2040' />\n");$oString.append("<category label='L 2050' />\n");$oString.append("</categories>\n\n");$oString.append("<dataset seriesName='July Return'>\n");$oString.append("<set value='-0.14' />\n");$oString.append("<set value='-0.94' />\n");$oString.append("<set value='-1.25' />\n");$oString.append("<set value='-1.49' />\n");$oString.append("<set value='-1.75' />\n");$oString.append("</dataset>\n\n");$oString.append("<dataset seriesName='YTD'>\n");$oString.append("<set value='2.36' />\n");$oString.append("<set value='3.31' />\n");$oString.append("<set value='3.60' />\n");$oString.append("<set value='3.81' />\n");$oString.append("<set value='--' />\n");$oString.append("</dataset>\n\n");$oString.append("</chart>\n");var myChart = new FusionCharts("/images/fusionCharts/MSColumn3D.swf", "LFundsforJuly", "425", "350", "0", "0");myChart.setDataXML($oString.toString());myChart.render("LFundsforJuly");</script>For the past twelve months, the return rates look even better, despite the falling returns for the past several months. Here are the rates of return for the past twelve months for all of the TSP funds:
<script type="text/javascript">var $oString = new StringBuilder();$oString.append("<chart caption='12 Month Return' xAxisName='Fund' yAxisName='Rate of Return' numberSuffix='%25' numberPrefix='' exportEnabled='0' exportHandler='/images/fusionCharts/ExportHandlers/PHP/FCExporter.php' exportAtClient='0' exportAction='download' rotateLabels='0' slantLabels='0' showValues='1'>\n");$oString.append("<set label='L Income' value='6.23' />\n");$oString.append("<set label='L 2020' value='12.87' />\n");$oString.append("<set label='L 2030' value='15.25' />\n");$oString.append("<set label='L 2040' value='17.14' />\n");$oString.append("<set label='G Fund' value='2.63' />\n");$oString.append("<set label='F Fund' value='4.57' />\n");$oString.append("<set label='C Fund' value='19.62' />\n");$oString.append("<set label='S Fund' value='26.22' />\n");$oString.append("<set label='I Fund' value='17.47' />\n");$oString.append("</chart>\n");var myChart = new FusionCharts("/images/fusionCharts/Column3D.swf", "12MonthReturn", "500", "425", "0", "0");myChart.setDataXML($oString.toString());myChart.render("12MonthReturn");</script>As you can see, the S fund has come out on to with a return rate of 26.22% and the C fund isn't too far behind with a return of 19.62%. The best performing L fund was the L 2040 with a rate of 17.14%.
A common question from our readers is whether retirees should put all of the TSP funds into the G and F funds. These funds are generally considered to be the safest funds although the federal government using the G fund as a source of revenue to help with the debt ceiling debate may have shaken some readers.
The reality is that those who put all of their money into the safest funds often have a much lower rate of return over a longer time period. Most people can plan on living at least 20 or 30 years into retirement and you want to ensure your financial security. Having all of your money in the safest funds can lead to rapidly diminishing funds as the real rate of inflation is likely to exceed your return rate each year and you will miss out on the times when the stock market moves ahead much faster than the bond funds.
No doubt, this is one reason the lifecycle funds have been increasingly popular among TSP investors. According to the latest TSP report, TSP investors are now allocating 18% of their funds to the lifecycle funds which is the highest figure since the lifecycle funds were initiated. The advantage to these funds is that they provide automatic diversification in the different TSP funds with the relative risk decreasing as the time until retirement draws closer.
Stock investors can anticipate considerable volatility in the coming months. On a positive note, stocks usually do well in the third year of a president's term. A number of financial analysts predict that the stock market will be up from its current level by the end of the year.
On the other hand, there is also the likelihood of a downgrade of America's debt rating as our crushing federal debt continues to grow each day and the impact of this downgrade on stock prices, if or when it occurs is difficult to predict.
Moreover, the economy is very close to going back into a recession. Our economic growth in the first quarter was just revised from a growth rate of 1.9% to 0.4%. The American economy is still not as large as it was in the fourth quarter of 2007 despite massive government spending.
With the current situation regarding America's debt load and the stubbornly high unemployment rate, some readers will recall this quote from an article we published in April 2009:
"...Secretary of the Treasury Henry J. Morgenthau testified before the House Ways and Means Committee in 1939: 'I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot.' We don't know if today's stock market will continue as it did in 1938. If it does, the rest of this year will be good for stock market investors."
And, in fact, the rest of 2009 was a good year for stocks just as the market rebounded in 1938 before starting a long downward trend.
Today, of course, we have our own economic problems but the start of a new World War as was occurring in 1939 is not one of them. No doubt, investors have reason to be cautious as there is plenty of uncertainty about the future performance of stock market investments. Tread carefully—your financial performance will impact your financial security during your retirement years!
© 2011 FedSmith Inc. All rights reserved. This article may not be reproduced without express written consent of FedSmith Inc.
Tuesday, August 2, 2011
Investors in the Thrift Savings Plan have now seen their stock investments going down for the third straight month. (See all of the most recent and historical TSP fund monthly returns in the TSP Corner.)
Here are the results for July:
- C fund: -2.04%
- S fund: -3.14%
- I fund: -1.60%
- F fund: 1.59%
- G fund: 0.22%.
Here is a chart displaying the results for the TSP funds for July and for the year-to-date:
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<script type="text/javascript">var $oString = new StringBuilder();$oString.append("<chart caption='July 2011 TSP' xAxisName='Fund' yAxisName='Rate of Return' numberSuffix='%25' numberPrefix='' exportEnabled='1' exportHandler='/images/fusionCharts/ExportHandlers/PHP/FCExporter.php' exportAtClient='0' exportAction='download' rotateLabels='0' slantLabels='0' showValues='1'>\n");$oString.append("<categories>\n");$oString.append("<category label='G Fund' />\n");$oString.append("<category label='F Fund' />\n");$oString.append("<category label='C Fund' />\n");$oString.append("<category label='S Fund' />\n");$oString.append("<category label='I Fund' />\n");$oString.append("</categories>\n\n");$oString.append("<dataset seriesName='July Return'>\n");$oString.append("<set value='0.22' />\n");$oString.append("<set value='1.59' />\n");$oString.append("<set value='-2.04' />\n");$oString.append("<set value='-3.14' />\n");$oString.append("<set value='-1.60' />\n");$oString.append("</dataset>\n\n");$oString.append("<dataset seriesName='Year-to-Date'>\n");$oString.append("<set value='1.66' />\n");$oString.append("<set value='4.39' />\n");$oString.append("<set value='3.85' />\n");$oString.append("<set value='3.81' />\n");$oString.append("<set value='3.59' />\n");$oString.append("</dataset>\n\n");$oString.append("</chart>\n");var myChart = new FusionCharts("/images/fusionCharts/MSColumn3D.swf", "July2011", "450", "375", "0", "0");myChart.setDataXML($oString.toString());myChart.render("July2011");</script>The L funds show a similar result and they are down for the third straight month as well. Here are the results for these funds for July and the year-to-date:
<script type="text/javascript">var $oString = new StringBuilder();$oString.append("<chart caption='July L Funds' xAxisName='Fund' yAxisName='Returns' numberSuffix='%25' numberPrefix='' exportEnabled='1' exportHandler='/images/fusionCharts/ExportHandlers/PHP/FCExporter.php' exportAtClient='0' exportAction='download' rotateLabels='0' slantLabels='0' showValues='1'>\n");$oString.append("<categories>\n");$oString.append("<category label='L Income' />\n");$oString.append("<category label='L 2020' />\n");$oString.append("<category label='L 2030' />\n");$oString.append("<category label='L 2040' />\n");$oString.append("<category label='L 2050' />\n");$oString.append("</categories>\n\n");$oString.append("<dataset seriesName='July Return'>\n");$oString.append("<set value='-0.14' />\n");$oString.append("<set value='-0.94' />\n");$oString.append("<set value='-1.25' />\n");$oString.append("<set value='-1.49' />\n");$oString.append("<set value='-1.75' />\n");$oString.append("</dataset>\n\n");$oString.append("<dataset seriesName='YTD'>\n");$oString.append("<set value='2.36' />\n");$oString.append("<set value='3.31' />\n");$oString.append("<set value='3.60' />\n");$oString.append("<set value='3.81' />\n");$oString.append("<set value='--' />\n");$oString.append("</dataset>\n\n");$oString.append("</chart>\n");var myChart = new FusionCharts("/images/fusionCharts/MSColumn3D.swf", "LFundsforJuly", "425", "350", "0", "0");myChart.setDataXML($oString.toString());myChart.render("LFundsforJuly");</script>For the past twelve months, the return rates look even better, despite the falling returns for the past several months. Here are the rates of return for the past twelve months for all of the TSP funds:
<script type="text/javascript">var $oString = new StringBuilder();$oString.append("<chart caption='12 Month Return' xAxisName='Fund' yAxisName='Rate of Return' numberSuffix='%25' numberPrefix='' exportEnabled='0' exportHandler='/images/fusionCharts/ExportHandlers/PHP/FCExporter.php' exportAtClient='0' exportAction='download' rotateLabels='0' slantLabels='0' showValues='1'>\n");$oString.append("<set label='L Income' value='6.23' />\n");$oString.append("<set label='L 2020' value='12.87' />\n");$oString.append("<set label='L 2030' value='15.25' />\n");$oString.append("<set label='L 2040' value='17.14' />\n");$oString.append("<set label='G Fund' value='2.63' />\n");$oString.append("<set label='F Fund' value='4.57' />\n");$oString.append("<set label='C Fund' value='19.62' />\n");$oString.append("<set label='S Fund' value='26.22' />\n");$oString.append("<set label='I Fund' value='17.47' />\n");$oString.append("</chart>\n");var myChart = new FusionCharts("/images/fusionCharts/Column3D.swf", "12MonthReturn", "500", "425", "0", "0");myChart.setDataXML($oString.toString());myChart.render("12MonthReturn");</script>As you can see, the S fund has come out on to with a return rate of 26.22% and the C fund isn't too far behind with a return of 19.62%. The best performing L fund was the L 2040 with a rate of 17.14%.
A common question from our readers is whether retirees should put all of the TSP funds into the G and F funds. These funds are generally considered to be the safest funds although the federal government using the G fund as a source of revenue to help with the debt ceiling debate may have shaken some readers.
The reality is that those who put all of their money into the safest funds often have a much lower rate of return over a longer time period. Most people can plan on living at least 20 or 30 years into retirement and you want to ensure your financial security. Having all of your money in the safest funds can lead to rapidly diminishing funds as the real rate of inflation is likely to exceed your return rate each year and you will miss out on the times when the stock market moves ahead much faster than the bond funds.
No doubt, this is one reason the lifecycle funds have been increasingly popular among TSP investors. According to the latest TSP report, TSP investors are now allocating 18% of their funds to the lifecycle funds which is the highest figure since the lifecycle funds were initiated. The advantage to these funds is that they provide automatic diversification in the different TSP funds with the relative risk decreasing as the time until retirement draws closer.
Stock investors can anticipate considerable volatility in the coming months. On a positive note, stocks usually do well in the third year of a president's term. A number of financial analysts predict that the stock market will be up from its current level by the end of the year.
On the other hand, there is also the likelihood of a downgrade of America's debt rating as our crushing federal debt continues to grow each day and the impact of this downgrade on stock prices, if or when it occurs is difficult to predict.
Moreover, the economy is very close to going back into a recession. Our economic growth in the first quarter was just revised from a growth rate of 1.9% to 0.4%. The American economy is still not as large as it was in the fourth quarter of 2007 despite massive government spending.
With the current situation regarding America's debt load and the stubbornly high unemployment rate, some readers will recall this quote from an article we published in April 2009:
"...Secretary of the Treasury Henry J. Morgenthau testified before the House Ways and Means Committee in 1939: 'I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot.' We don't know if today's stock market will continue as it did in 1938. If it does, the rest of this year will be good for stock market investors."
Today, of course, we have our own economic problems but the start of a new World War as was occurring in 1939 is not one of them. No doubt, investors have reason to be cautious as there is plenty of uncertainty about the future performance of stock market investments. Tread carefully—your financial performance will impact your financial security during your retirement years!
© 2011 FedSmith Inc. All rights reserved. This article may not be reproduced without express written consent of FedSmith Inc.
