Where is the profit sharing and dividends?

[cyoa1fan]

I've called the TSP agency and all they can tell me is that we are recieving them. So my question is how, when, and why don't I see them. I've watched when big name companies pay out like BP which is a large percentage of the I funds. Can anyone explain to me where they are? The EFA payed out $1.56 per share last year and I understand that the I fund is 3 to 1 on the value of the the EFA but where is our prercentage of the profits for investing in the I Fund?

Butch

 

[Bullitt]

C S and I Funds are Index Funds which mimic an Index. The total return of the SP500, DJIA, DJW 5000, etc. indexes have their dividend distributions factored into the equation daily as if they were reinvested. Therefore, the dividend reinvestment is already factored into the daily NAV share price of the TSP funds. In an index of a couple hundred stocks, one stock declaring a dividend will have minimal effect even if it's a BP or XOM. This is one reason why experts say it's so difficult for fund manager's to truly beat the index that they go up against.

 

[cyoa1fan]

If the profits are already calculated into the I Fund and not the EAFE then the I fund should always be higher since the EAFE does not add in the Dividends but pays them out here shortly normally around Christmas.

iShares MSCI EAFE Index (EFA)​

21-Dec-06$ 1.533 Dividend23-Dec-05$ 1.11 Dividend9-Jun-053 : 1 Stock Split 23-Dec-04$ 0.803 Dividend22-Dec-03$ 0.52267 Dividend16-Dec-03$ 0.15667 Dividend23-Dec-02$ 0.62733 Dividend24-Dec-01$ 0.02733 Dividend


http://finance.yahoo.com/q/hp?s=EFA&a=07&b=27&c=2001&d=10&e=26&f=2007&g=v

 

[Bullitt]

EFA is an ETF, not an index. The I Fund is an Index Fund but I don't know exactly what 'average' the I Fund tracks. I've seen it posted here before. Besides, how many times is the I Fund up significantly higher than EFA due to the FV Barclay's imposes?

Your 'dividends' are being reinvested daily. If dividends weren't reinvested in the S&P 500 index, then we'd probably be around 450 instead of where we are today. All the more reason to invest in stocks for the long run.

 

[cyoa1fan]

Re: How are the Dividends and profits distibuted?

This question may clear up what I'm looking for-

The I Fund is "to match the performance of the Morgan
Stanley Capital International EAFE (Europe, Australasia, Far East) Index "(tsp) with the Management of Morgan Stanley Capital
International EAFE Stock Index Asset Manager Barclays Global Investors. Here is my question is it better to invest 5% in the TSP and the rest directly into the iShares MSCI EAFE Index (EFA) in which the TSP I Fund tracks. To my understanding at the TSP site both are managed by Barclays. How are the Index dividends payed out - Does Barclay's Managers of the TSP take all the Dividends made and distibute equally across the indexs, do they pay the dividends daily by index and restict the dividends specifically to that Index, do they take out any special fees from the dividends or profit sharing prior to distribution?

Last year the dividends for the MSCI EAFE the benchmark for the I fund payed out $1.533 per share at an FV $72.55 per share. The I fund for that day was $22.10. A ratio of 3.28 per share. Divide $1.53 per share by 3.28 = .467 per share we would have been payed. Now that money should be distibuted over the course of a year but how is the question. Where is my .467 per share from the I fund. Did people invested in the C, S, G get it for my Risk?

The TSP only says that money is calculated into what you recieve daily. So why isn't the daily amount higher than the MSCI EAFE daily return if our dividends an profit sharing are rolled into what we are recieving daily?
If the EAFE at the end of the day is $1.00 we should get $1.01.
If the amounts are the same why shouldn't I invest directly into the MSCI EAFE instead of the I Fund, expecially if they are going to restrict my trading?

I'm just trying to find out if anyone has managed to get an answer from Barclays or the TSP? If it is calcualted daily, how?

CYOA1FAN- Choose Your Own Adventure

 

[cyoa1fan]

As an experiment 1 year ago I open a stock game account at www.investopedia.com to see how my TSP account would fair against the EFA. So far my TSP account is about $4,000 behind what I would have recieve had I invest just went out and bought the EFA actual stock. I know it's just a game account but the sad thing is I'm buying into the I fund every payday and the EFA game account is out pacing with just the initial money invested. I've now reduced my TSP account to just 6% every payday and saving up the money to do it for real.

Wish me luck,

Choose Your Own Adventure

 

[Bullitt]

According to http://www.tsp.gov/rates/monthly-current.html, current I Fund YTD is 14%.
According to www.yahoo.com using EFA as a ticker, I see 13.13% return as it's NAV YTD and 12.8% as it's market price YTD.

The reason I suspect is that the I fund has done better is because it reinvests all dividends automatically while the EFA distributes them as a cash payout.

Dividends are the only redeemer in a market downturn. I'll continue to let Barclay's reinvest my dividends commission free.

 

[Bullitt]

Adventure,

I wish you luck in your journey. With trade restrictions on the brink, I'm willing to bet that you won't be the only one partaking in a contribution cutback in order to fund your ETF quest.

 

[ekatteng]

When the EFA gives dividents... the EFA "stock" is usually reduced... however the I Fund value is not... nevertheless, I agree to reduce the TSP contribution to 5% and open an IRA account to trade EFA or regular trading account for that purpose to start getting the feelings of retirement if planning to roll over into traditional IRA and not making the mistake ofleaving the funds with the TSP.

 

[cyoa1fan]

" According to http://www.tsp.gov/rates/monthly-current.html, current I Fund YTD is 14%.
According to www.yahoo.com using EFA as a ticker, I see 13.13% return as it's NAV YTD and 12.8% as it's market price YTD.

The reason I suspect is that the I fund has done better is because it reinvests all dividends automatically while the EFA distributes them as a cash payout.

Dividends are the only redeemer in a market downturn. I'll continue to let Barclay's reinvest my dividends commission free." (Bullet)

Your post really got me thinking and I have to thank you for all your quick responces to this ever puzzling suject of "The Mistery of the Profits and Dividends"

Here is my response to the Idea that 14% is the Dividends-

http://www.tsp.gov/rates/returns-5years.html
2004 4.30 4.30 4.3410.8210.8818.0318.1020.0020.25
20064.934.404.4315.7915.7915.3015.2826.3226.34
I'll have to finish this later got to work standby

 

[cyoa1fan]

Time Period I Fund EAFE Stock Index

2003 37.94 38.59

2004 20.00 20.25

2006 26.32 26.34

http://www.tsp.gov/rates/returns-5years.html

If we are recieving Dividends and Profit Sharing how did the I fund finish with less money than the EAFE that does not include Profit Sharing or Dividends?

If we are being paid Dividends than the I Fund should always be Higher.
:worried:

 

[cyoa1fan]

Time Period I Fund EAFE Stock Index

2003 37.94 38.59

2004 20.00 20.25

2006 26.32 26.34

http://www.tsp.gov/rates/returns-5years.html

If we are recieving Dividends and Profit Sharing how did the I fund finish with less money than the EAFE that does not include Profit Sharing or Dividends?

If we are being paid Dividends than the I Fund should always be Higher.
:worried:

Here are the Returns from the EAFE with Dividends-
200339.17200420.70200514.02200626.86
http://en.wikipedia.org/wiki/MSCI_EAFE

For 2006 thats .54% missing from our account that should have been paid as a minimium.

 

[Bullitt]

Did you factor in TSP annual fees? Even though they are minimal, any fees will add up.

 

[cyoa1fan]

The Fees are what is driving me crazy also. I believe (dont qoute me on this one I'm working from a computer that can't open .pdf on the TSP site) that 2006 the fee was .30 per $1000 invested. I'm still researching how that compairs with IRA and investment accounts. The part that bothers me is the $1.56 per that was paid out in 2006, has just jumped to $2.00 per share paid out on DEC 24, 2007!

and why the difference of .54 per share (EAFE including dividends)?
Was that the actual charge per share? If that correct than we paid $540 per 1000 shares invested in 2006 not .30 per . That sound kind of high to me.
2006 I fund EAFE
26.32 26.86

 

[cyoa1fan]

Total Fees(adminstration costs, management fees, and trading fees) for the TSP I fund for 2006

26.86 26.32 = .54 per share difference
$1000 buys ~ 37shares ( 37.23 using 26.86 and 37.99 using 26.32)
37 share at a difference of .54 per share is $20.51 per $1000

The real total cost is $20.51 per $1000 invested per year if you compare it to what we could have earned without expenses!

Is that kind of expensive for investment costs? How much do investment cost for an IRA run? What about if I invest through Barclays directly?

I want them to put the real cost and how much they are making rather than trying to make it look like all they are charging us is administration fees. I like the TSP but I would love it more if they were honest and frank with there numbers.

They need to put the real numbers on our Participation statements rather than beating-around-the-Bush.

Thanks to everyone that submitted posts for helping me figure this one out! I’ve contacted the TSP office and they could not give me an answer on expenses. Expecially Bullet and others!

 

[Bullitt]

Adventure,

Good work in this matter.

All Index Funds (such as C Fund) have what is called 'tracking error'. It's nearly impossible to match the intended index exactly so most managers are satisfied with about 95% accuracy. One year it may do a bit better, another a bit worse, in the end it should come out even. One of the reasons it's impossible is because the managers elect to purchase a sample of the index instead of all 500 or even 5000 stocks (like in the DW 5000).

Basically, an Index such as the actual S&P 500, is merely a mathematical formula; a theoretical portfolio that is rebalanced daily. Managers use Indexes in various ways for their firm. A manager may use the Index Fund as a way to match buy and sell orders with their brokerage division in order to reduce trading costs. Another method is for dividends to be placed in a seperate account, arbitraged with futures to maximize $$, then reinvested when a new company needs to be purchased if it gets added to the index. (A whole seperate thread could be placed together based on how Index Funds operate.)

So here's what I'm getting at.... If the C, S, and I Funds only have a 'sample' of the Benchmark Index it intends to track, then there's really no way for the C Fund for example, to have the same dividend yield as the S&P 500. Perhaps that is what's causing the disparity.

Interesting article on ETF fees.
http://seekingalpha.com/article/30463-etf-fees-are-largely-irrelevant

Good luck

 

[cyoa1fan]

Thanks bullet for having patients with me on calculating how our money is managed. I think your right about the "Perhaps that is what's causing the disparity."(Bullet)

I've looked over the C fund since 1997 and I've only come up with one year where the C Fund outperformed the S&P 500. So here is my new question- Are Index funds goal only to match there benchmarks? Shouldn't they try to outperform them?

Thanks again Bullet,

CYOA

 

[Bullitt]

What it ultimately comes down to is the skill of the fund manager. He is the professional, he's the one that determines how large a sample he needs to maintain in order to track the benchmark. The more securities he owns in his sample, the less tracking error. However, fees increase with the amount of securities a manager maintains.

One way for a manager to reduce fees within an Index Fund would be to purchase ETF's instead of hundreds of individual stocks to supplement his sample. Though ETF's are being pumped aggressively to the retail investor, they are largely a tool for institutions to hedge and balance risk. For example, instead of trying to establish a position in a few stocks within the benchmark which have low liquidity, he can opt to cover that sample with an ETF.

Once a Fund Manager attempts to beat the Benchmark, he no longer is a passive Index Manager. He becomes an Active Fund Manager. In order to beat the benchmark, he'll try to pick winners with more of a focus on capital gains instead of matching the Index with a sample. As any informed investor knows, active fund management tends to be much of a fools game over the long run when compared to passive indexing.

When investing in funds of any kind, you're really only betting on the jockey, not the horse.

 

[Birchtree]

"For the past three years, share buybacks were the rage as low interest rates enticed companies to borrow money to buy back shares, a move that helps increase per-share earnings. Stock repurchases by the S&P 500 companies amounted to $586 billion last year, more than double the amount of dividend payouts. Aggressive buybacks by companies such as major oil company ConocoPhillips, which bought back $7 billion last year and reiterated plans to repurchase as much as $3 billion this quarter, helped reduce the shares outstanding in the S&P 500 to about 8.8 billion as of Jan. 18. That was the lowest since December 2000, according to Ed Yardeni, and 6.2% below the record high of 9.3 billion during September 2004". Profits on companies in the S&P 500 index are expected to grow 18% in 2008. That's up from a 12% increase that had been forecast in October. Earnings gains are looking stronger than ever for 2008 because the year earlier figures were so weak, especially for financial companies. Wishful thinking or C fund here we come.

http://online.wsj.com/public/us

 

[rokid]

Are Index funds goal only to match there benchmarks? Shouldn't they try to outperform them?CYOA

No, the goal of a passive index fund is to match its corresponding index at low cost. Consequently, the TSP funds, with their low tracking errors and very low management fees, are excellent performers. Incidentally, the G fund acts as a stable value fund and, therefore, doesn't have a corresponding index.

The TSP funds are designed to be used as components in a passive portfolio constructed to meet your need for return and tolerance for risk. TSP provides the major asset classes, i.e. cash, bonds, large/mid domestic stocks, small stocks, and international developed market stock.

The L funds represent professionally designed passive portfolios based on the idea that younger investors can assume more risk than older investors. Consequently, TSP not only provides excellent portfolio components, they also suggest appropriate portfolios based on your investment horizon, i.e. time to retirement. Amazingly, the L fund portfolio construction and daily re-balancing are provided for free!

TSP doesn't provide all of the funds that might be desirable. For example, inclusion of REITS, Emerging Markets, and perhaps, international bond funds would be nice. However, as a 401K, TSP is hard to beat. We're lucky to be able to invest in it. ------Jim