TSP Funds Forecast
TweetFrom tspfundtracker.com:
Like the overall stock market, the stock funds in the federal employees’ Thrift Savings Plan have hit new lows in the last two months. The TSP Funds that are composed only of corporate stocks (C, S, I, and L Funds) are down an average of about 40% from their highs reached in October 2007. Of course this is only a loss on paper, unless you have sold your funds. The TSP Funds are the 401K-type mutual funds owned by more than 3 million federal civilian and armed forces employees. Two of the TSP Funds, the G and F Funds, are composed of government bonds and their values have not suffered from the stock market downturn.
But the recent stock market downturn is only temporary, says Tom Allen, editor of the TSP Fund Tracker, a website that tracks daily changes in TSP Fund share prices. He says, “The share prices of stocks and the TSP Funds are at such low levels now that they can only go up from here in the long-term. Stocks currently are priced for a significant recession as indicated by the current S&P 500 Index of around 900, which is about 12 times the $75 of predicted 2009 operating earnings for all 500 companies in that index. During non-recessionary times the S&P 500 Index has typically risen to somewhere between 15 and 25 times its earnings. If 2009 earnings for the Index are $75 and the end of the recession starts to become apparent, then the Index can be expected to rise to 15 to 25 times $75, or somewhere between 1100 and 1350. This will be an increase of 25% to 50% from the current 900 level of the S&P 500. The TSP stock funds (C, S, and I) will rise a similar amount.”
Allen says the current economic recession will likely end by late 2010 as banks resume normal lending, home prices stop falling, the unemployment rate tops out, and consumers begin spending. He explains that stock prices may suffer large falls prior to the end of the recession, but these price drops will only be temporary. Allen points out that the 2-year graph of the TSP Funds show stock prices at the end of 2008 appear to be “crossing a big valley” (see graph, below). He believes that when the first evidence of the end of the recession appears, stock prices will rise from this “valley”. The question is: How deep and wide is the valley?
The daily-updated graphs of the TSP Funds can be viewed at http://www.tspfundtracker.com.
December 9th, 2008 13:01
Only paper losses? It will take 10 years to get back to the principal people had before the crash. What will happen when the Dow hits 4400 sometime next year? So let me understand. You had 200K in the C Fund and have lost 40%. You are now 80K poorer. If the market goes down as expected by another 50% you will lose another 60K. Paper losses? You need to get real! This is real money that people are losing and it will hurt everyone, that is a fact!!!
December 9th, 2008 16:21
The chart certainly is a poster child for diversification. The truth is that no one knows where the market is headed from here. If I knew for sure it would hit 4400 “sometime next year”, I could make a fortune.
I agree that for the long-term investor it is too late to sell. But how deep and long is the “valley” is uncertain. I, for one, intend to take advantage of current prices and thus continue to dollar-cost average into the markets with the goal of building a diversified portfolio. I understand that this strategy is being optimistic about America’s long-term prospects, but that is what investing is all about, namely betting that the future will be brighter than the present and thus stock prices will “eventually” be bid up. Please note that this is a long-term strategy, but I am putting my money where my mouth is.
December 9th, 2008 22:31
my question is once it comes up and you feel good about it i would like to take it all out of feers and put it were i want it and have more controlof it future.
December 9th, 2008 23:21
One thing is for sure, the market is still headed down significantly, and I’m betting for a long while longer. As far as I’m concerned, the valley will be “deep and wide”, as the song goes. I say it’s not too late to get out, the sooner the better, and you’ll be that much more ahead when the market does bottom out for good. I won’t say how far down I think it may drop but it’s definite it will drop. This economy has much more to decline. And it’s not only our economy but the rest of the world will be affected. You need to decide you don’t want to participate in this decline, get out and go fishing or play golf and don’t worry about it for now.
December 21st, 2008 21:14
It has long been my opinion that the so-called “small invester” should self-manage their own investments. I am a 33 year craft employee of the USPS. I will be soon retired. I have always had my own independent brokerage account. I never engage in mutual funds of any type, TSP included. Why? Because you do not have the second by second,minute by minute,hour by hour access to your investment/money to make the nessessary snap decisions needed to take advantage of possible upswings in the stock market or, make emergency pullouts of positions during sell-offs and down turns. With TSP, or any other type of mutual fund, you must rely on a manager to make those actions and you never know whose intrests he/she has in mind. Or, whether that manager is even a good enough judge of conditions that warrant emerency actions. Also, that manager may decide to liquidate positions to take gains. That sets you up for capital gain taxes at a time when you may not desire to pay such taxes at that particular time. Or, decide to sell at a loss to staunch further losses in a downturn- even though you yourself would probably choose to ride it out to hope for a recovery that day. My advice is to get out of the TSP if you can and open up an individual brokerage account at any discount brokerage house. They can even help you invest in corporate and government bonds if that is what you want to do instead of stocks. You can even go to the U.S> Treasury website and get T-Bills and Gov. bonds directly from there. Dont trust somebody else to look out for your financial welfare.
January 4th, 2009 18:27
My dear friends dont’ act like a losers, you invest at high risk and know how it is, keep your faith and dont’ run away, things are going to get better, happy 2009, I love u all
January 10th, 2009 14:36
It is a new year and new paradigm, it’s time to look only at the number of shares acumulated not the price of the shares.
One question, Is the S&P going to be higher or lower the day you retire than it is now, 850??
January 16th, 2009 22:52
Use the “L” funds. Stay in the market. Do not cash out. The S&P 500 has averaged 10% over the last 90 years. Some years up, some years down, but in the long run it returns 10%. Stocks are on sale right now. It’s like buying milk for $1.49 instead of $2.99. Follow the lead of Warren Buffett, who is buying not selling. Use “dollar cost averaging” by investing regularly through payroll deduction. Good luck and happy investing.
February 22nd, 2009 11:36
I agree with Art B. It is the sale of the century right now.
March 1st, 2009 14:09
The sale of the century has yet to happen. We started moving out of stocks C, S & I beginning in 2007 moving into the G fund. The bulk of the money is still in G, but all new allocations are distributed between C, S, & I. I also know these funds will be declining over the next two years. However, focus on buying shares and the long term outlook.