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TSP.Gov web site shows under C Fund Facts, that 15% of the S&P 500 Index is dedicated to Health Care. Under S Fund Facts, the Wilshire 4500 Completion Index shows 12% invested in Health Care. I am wondering what would be the impact to the C & S funds if a government health care plan would become a reality.
It is my understanding that the corporate stocks held in the TSP funds are somehow weighted and balanced to closely approximate the S&P 500 and the Wilshire 4500. So I presume that when an individual company stock continues into the skids it is dropped from the S&P 500 or Wilshire 4500 index and replaced by a more robust up and coming company stock, then the TSP administrators would also sell those specific holdings and buy the replacement company stock.
I'm a mailman, not an investment guy. So somebody with real knowledge is welcome to add some clarity her.
I think a Republican taking Massachusetts marked the top in healthcare. Too much bullishness in the "healthcare for the long term" prediction and look at how many health stocks have been upgraded in the past week. I sold MRK today which I have held for the past 8 months (so I'll get hammered in ST cap gains tax). Don't forget, if it's a stock, it will move with the general market. It may outperform some, meaning, if the market is down 10% healthcare may only be down 8%.
As far as TSP's buying and selling, the managers have to mirror the index so they're probably rebalancing monthly which would be my guess. Let's say Healthcare stocks are up 1% and the general market is down 1% for the month. They may sell some Healthcare stocks to buy whatever stocks are bringing down the general market. However, with this being an Index fund with low costs and run by Barclays, they probably just trade amongst their other mutual funds, pension and sector holdings. A company like Vanguard for instance doesn't have to really go to the market since they have enough ETF's and Funds to make their own market.
It's my understanding that a pension fund uses rebalancing as their form of buying and selling since asset allocation over time is what produces returns, not market timing. Though, one could argue that rebalancing is a form of market timing.
Now a hedge fund.... They make large bets on certain sectors, so if a Hedge Fund has a big allocation to HC, they may let it ride until their quant system says sell, which is what causes the big swings in the market.
Good questions you two.