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It's a safe bet that readers with money in the Thrift Savings Plan
(TSP) don't spend most of the day watching the minute-by-minute
fluctuations of the stock market. Unless you are retired, or don't have
a very challenging job, spending your days watching stock prices
probably is not a good career move anyway.
But a number of readers do check out how their TSP funds did the previous day
and probably wonder if they are closer to retirement as they calculate the value
of their TSP investments. (You can track the
daily rates for all TSP funds in the TSP Corner.)
We post the latest figures at the top of our front
page each day for all of the TSP funds. So, if you get your morning newsletter
and check out how your TSP investments did yesterday, you may be surprised to
see the following results from just one day of trading:
- I Fund: Down .56
- S Fund: Down .66
- C Fund: Down .45
- F Fund: Up .06
- G Fund: Up .0012
You won't find many instances where your TSP funds change that much in one
day. So, if you were not paying attention to the stock market on May 6, you are
undoubtedly wondering: "What happened?"
The stock market plunged in a five-minute selloff that appeared to be
triggered by a breakdown of trading systems. After
dropping nearly 1,000 points, the market rebounded but it still closed down
3.2%. In fact, the stock market experienced the biggest intraday trading drop in
history.
Some stocks lost 100% of their value in the five minute drop before moving
back up again.
Here is how the Wall Street Journal
summarized the event: "The Securities and Exchange Commission and the Commodity
Futures Trading Commission said they were working with other regulators to
review 'unusual trading activity.' The major U.S. stock exchanges said they were
looking for trading glitches and examining potentially erroneous trades in
multiple stocks. Major exchanges said they will cancel erroneous trades that
occurred during the selloff."
In short, no one is certain what caused the volatility. No doubt, concern
about the riots, government debt and the future of Greece contributed to the
overall jitters in the stock market.
The correction in the stock market has brought the market down about 9% in
the past few days. That is not unusual after the large gains in stocks in recent
months and a number of analysts had predicted a drop as part of the normal stock
market trading. The temporary plunge may turn out to be due to an anomaly in the
software used by firms that engage in heavy trading activity.
The harrowing stock market activity resulted in gains for the F and G funds
as the value of stocks fell.
Chances are, the market will recover the losses but the event has left many
people nervous and shows how jittery stock traders are about the possibility of
bad news and the fragility of credit and banking systems in Europe and the U.S.
carrying the danger of driving down stock prices after the huge gains in recent
months.
Investing in stocks is not like having a certificate of deposit at a bank.
There can be rapid fluctuations in the value of your investments. It isn't often
though that you will see new historic records being set for rapid increases or
drops in the stock market. Trying to predict when these drops will occur
probably is not possible as yesterday's activity indicates. Chances are, some
readers will look at yesterday's big drop as a chance to invest in stocks at a
lower price. Others will see greater danger in their future retirement income
and invest more of their money in the lifecycle funds of the TSP to cushion the
danger inherent in a fluctuating stock market.
For all TSP investors, you can try consoling your jittery nerves by knowing
that you experienced an historic day in the history of the stock market as a
result of the trading activity on May 6th.
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