Something Fishy

**Dr Faustus** · 12-12-2005, 02:05 PM

I was under the impression that the TSP was using compounding interest - which is certainly what their calculators seem to imply. However, I was looking at my account this morning and saw something, which I've seen before but just didnt register until now.

Lets say the G Fund is at 10.00 per share. If I have $100,000, then when I get into the G fund, I wind up purchasing 10,000 shares. When the G Fund goes up a penny, my shares are worth a penny more so the total in my account goes up to $100,100.00. Ok, well and fine. Note that the number of shares that I own did not change. Lets say now that the G fund goes up a penny more, so now my shares are worth $10.02. Now the total in my account is $100,200.00

This is SIMPLE interest, not COMPOUND interest. When the TSP was originally set up, it used compound interest. It appears to me as if this changed when they switched over to daily valuation and, as such, I think the calculators that the TSP has are their website are wrong.

Can anyone verify this? Am I way off base here?

**bkrownd** · 12-12-2005, 03:05 PM

If a share price goes up $0.01...then it goes up $0.01, not $0.011 or $0.012 or any other amount. You're confusing prices and percentages somehow.

**mlk_man** · 12-12-2005, 03:07 PM

The G fund doesn't actually go up a penny a share. It's more like .09% or whatever. If this is the case, it'll show up as going from $10 a share to $10.01 a share. Actually would be $10.009 per share. So, your account with astarting balance of $100,000 should now show $100090, not $100100.