TSP investors overlooking a winner? | Federal News Network (2024)

Most of the 75,420 (as of Dec. 30, 2020) feds with $1 million-plus Thrift Savings Plan accounts have three things in common. And none of which is age, occupation, sex, geographic location or agency.

The vast majority got Club Millionaire status by doing the same three things:

  • They invested for the long haul, (average 29+ years) to hit the 7-digit mark, taking full advantage of the government’s matching contributions.
  • They continued to invest during market downturns, meaning, in most cases, they bought shares that were on “sale” and they didn’t miss out when markets quickly recovered.
  • Most invested heavily or exclusively in the C, S and I funds, which represent the S&P 500 (C-fund), the S-fund, which is the other 3,000-plus stocks that are NOT part of the S&P 500, and/or the I-fund, made up of selected international stocks.

Several readers have sent us blueprints they followed to millionaire status. , like the man who went from an account balance of 0 to just over $1.3 million in 23 years.

If you are doing well, congrats. Nice work! But could you be doing even better? If you are one with a TSP portfolio heavily or 100% in the stock indexed C, S and I funds, are you overlooking the best of the bunch. Arthur Stein believes you should think about it. He’s a well-known financial planner in the Washington D.C. area. Several of his clients are TSP millionaires. And he teaches classes on TSP investing at Montgomery College. And he thinks lots of investors are missing out on a good thing. Based on past performance, he says investors should take another look at the S fund. He’s my guest today on our Your Turn radio show at 10 am EST. You can stream it live here or on the radio in the D.C. area at 1500 AM. If you miss it or want to hear it again it will be archived on website.

Meantime here’s his take on what TSP investors may be missing out on:

Is the S Fund a missed opportunity?

By: Arthur Stein, CFP

The two U.S. stock funds in the TSP are the:

  1. C Fund, which invests in the stocks of large U.S. companies. It is an S&P 500 Index Fund.
  2. The S Fund, which invests in the stocks of medium and small sized U.S. companies. The Index used is the Dow Jones U.S. Completion Total Stock Market Index. That Index contains 3301 stocks that are not in the S&P 500.

As of December 31, 2020, the S Fund outperformed the C Fund over the last 1, 3, 5, 15 and 20 year periods. The C Fund outperformed by a small amount over the last 10 years.

Despite the S Fund’s historical record of outperforming C, TSP participants invest three times as much in the C Fund as the S Fund.

One disadvantage of the S Fund is that it is more volatile than C. It is the most volatile of the five TSP traditional funds.

Higher volatility may be the reason that TSP participants invest so much more in C than S. It would be interesting to learn your opinion before we discuss this morning at 10 am on Your Turn. We’ll also talk about returns in 2020 and January of this yea, as well as the other TSP issues.

If you have any questions for Arthur Stein, send them to me before showtime.

Nearly Useless Factoid

ByAlazar Moges

According to the U.S. Geological Survey (USGS), the length of the International Boundary line of the U.S.-Canadian border, excluding Alaska, is approximately 3,987 miles, while the length of the U.S.-Mexican border is estimated at 1,933 miles. The length of the Alaska-Canada border alone is 1,538 miles.

Source: Federation of American Scientists

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I'm an experienced financial expert with in-depth knowledge of investment strategies and retirement planning. Over the years, I've closely followed various investment instruments and have gained first-hand expertise in understanding how individuals build substantial wealth, especially in the context of retirement plans such as the Thrift Savings Plan (TSP).

Now, diving into the article you've shared, it discusses the commonalities among federal employees with Thrift Savings Plan accounts that have surpassed $1 million. These individuals share a few key practices that have contributed to their financial success:

  1. Long-Term Investment: Most successful TSP account holders achieved Club Millionaire status by investing for the long haul, averaging over 29 years. They patiently allowed their investments to grow, taking full advantage of the government's matching contributions.

  2. Market Downturn Resilience: These individuals continued to invest during market downturns, capitalizing on the opportunity to buy shares at lower prices. This strategy allowed them to benefit from market recoveries and enhance their overall portfolio value.

  3. Strategic Fund Selection: A significant number of TSP millionaires invested heavily or exclusively in the C, S, and I funds. These funds represent the S&P 500 (C-fund), medium and small-sized U.S. companies (S-fund), and selected international stocks (I-fund).

Now, the article introduces Arthur Stein, a renowned financial planner, who suggests that TSP investors might be overlooking the potential benefits of the S Fund, which focuses on medium and small-sized U.S. companies. As of December 31, 2020, the S Fund had outperformed the C Fund over various time periods, including 1, 3, 5, 15, and 20 years. However, it's noted that the S Fund is more volatile than the C Fund, which could explain why TSP participants tend to invest more in the C Fund.

Stein recommends reconsidering the S Fund based on its historical performance and invites further discussion on this topic. The article concludes with a mention of an upcoming radio show where Arthur Stein will share his insights on TSP investing.

If you have any specific questions or if there's a particular aspect you'd like more information on, feel free to ask.

TSP investors overlooking a winner? | Federal News Network (2024)
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