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The stock market has been on a roll as there is evidence that the
recession may be showing signs of ending.
Investors in the Thrift Savings Plan may also be breathing a sign of relief.
While the full value of your stock investments may not have been recovered from
the time your investments were made, there is a large increase in the overall
value of the TSP funds and many investors are now ahead if they have been
investing on a regular basis.
The Standard & Poor's 500-stock index on which the TSP C fund is based was up
3.4% for August. More importantly, that is the sixth consecutive month of gains
for this index. The result is that the C fund has also been going up for the
past six months with monthly returns ranging from 9.58% in April to 0.24% in
June. You can check out the monthly returns for
all of the TSP funds in the TSP Corner.
Here are the returns for August for the underlying TSP funds:
But, after savoring your substantial year-to-date returns for these funds, step
back and take a deep breath and get a broader perspective.
After a substantial gain as we have seen in stocks this year, it is not
uncommon for a dip or a correction of as much as 10% to occur. Moreover,
September is historically one of the worst months for stock market returns.
According to the Wall Street Journal, since
1900 the leading stock market index has fallen an average of 1.1% in September.
That is the only month with a significant average drop.
And, in the 10 years through 2008, the Dow index has fallen in seven
Septembers with an average loss during this month of 3.4%.
Perhaps this September will be different. For those investors who invest in
various funds or in a lifecycle fund each pay period, there is presumably no
cause for concern. But, for those investors who delight in moving their money
into our out of funds at different times to try and predict the ups and downs of
the market, there is reason to be wary.
Other investors will predict that, because stocks are still down
substantially over the past year, the current market will continue to go up.
Here are the TSP results over the preceding 12 month period ending in August
2009:
At a minimum, this means that your overall investment for the past 12 months may
still be showing red ink despite the recent gains in most of 2009.
There is no way to accurately predict what will happen in the next month or
for the rest of the year. For now, you can be happy to have seen your
investments growing throughout the year but any investor would be wise to remain
cautious as there is still plenty of risk. (See, for example,
Thrift Savings Plan Funds Rebounding: Are We in a
New Era or Can History Tell Us Anything About Our Financial Future?)
© 2009 FedSmith Inc. All rights reserved. This article may not be reproduced without express written consent of FedSmith Inc.
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