During the Great Recession of 2008-2009, the S&P 500 Index lost 50% of its value. Federal Thrift Savings Plan Fund C follows the S&P 500.
The Great Recession (which only lasted 17 months as recessions progressed) followed the boom years from 2002 to 2007. What goes up comes down too. At least so far.
This is why federal investors, who have become more sophisticated over the years, should be careful. How they behave cautiously or panic during a recession can determine how much they will have in their retirement nest egg when they leave government. The number of TSP millionaires exceeded 95,000 at last count. Most of them are long-time investors who continued to buy stocks in the TSP’s three stock index funds (C, S, and I) during the recession, even as millions of other investors fled to the “security” of the Treasury securities fund G.
So what does an investor do? Plan ahead and don’t panic, that’s what most pros say. But knowing what to do in the next stock market crash and doing it are two very different things. Financial planner Arthur Stein has a number of clients who are TSP millionaires. Most are not, but hope to be. He says the authorities are now investing more in fund C than in low-yielding fund G. And it’s a good thing. Until a certain point! This is what we will be talking about today at 10 a.m. on Your turn. It will be streaming here or on the radio at 3:00 p.m. in the Baltimore-Washington DC area. He’s going to tell us about the next, long-awaited market downturn. If you have any questions for them, send them to me at [email protected] before show time.
In the meantime, he wrote this preview of the series today and what he will be talking about.
TSP investors have become more aggressive in their investment allocations. They are now investing more in US equity funds than before. Indeed, allocations to Fund C (an S&P 500 stock index fund) are now higher than those to Fund G (short-term government bonds).
Source: FRTIB, June 2021 performance report.
In short, participants invest a higher percentage in US equity funds (C and S) and a lower percentage in bond funds (F and G) than at any time in the past. Fund I (shares of foreign companies) is an exception; it is less popular than in 2011.
Note that the Fund L allocation does not break down Fund L’s investments into traditional individual funds.
One of the reasons for the growing popularity of US equity funds is the difference in performance over the past 15 years. Meanwhile, US stocks outperformed bonds significantly.
At 9,032 pounds, the largest rubber ball on record was made by Joel Waul of Lauderhill, Fla. It was measured in 2008 with 700,000 rubber bands used. Joel started creating his elastic ball in 2004.
