TSP Snapshot: Riders on the storm

Friday - 7/2/2010, 5:30pm EDT

WFED's Max Cacas with Ed Zurndorfer, registered employee benefit consultant

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By Max Cacas
Reporter
FederalNewsRadio

"An important key to investing is to remember that stocks are not lottery tickets." - Peter Lynch, investment fund manager

Volatility and uncertainty on both domestic and international stock markets have contributed to poor performance in the Thrift Savings Plan in June and for the second time in three months.

"The second quarter of 2010 was a miserable quarter for the stock market," says Ed Zurndorfer, a registered employee benefit consultant, and a former federal worker, in an interview with Federal News Radio.

"So the C, S, and the I funds had a negative return over the second quarter. In fact, this is the worst quarter since the 2008 downturn on the stock market. The market came back in 2009, and was doing well until this last quarter. There are a lot of factors that contributed to it, but most TSP accounts that were invested in the C, S and I funds were way down for this quarter."

Zurndorfer says for wise investors who know that the TSP is a part of a long-term investment strategy; this downturn is nothing to worry about in the short term. In fact, he recommends that feds invested in the TSP continue, and even increase if possible, their contributions to their TSP accounts.

"By putting more down now, they're buying more shares, and eventually, like the stock market has done in the past, it will come back, and as a result of buying more shares now, the total value of their accounts will be much higher by the time the market goes up, and it will be eventually, the value of their accounts will be much higher," he says.

At the top of the list of factors affecting the stock market and the TSP last month, Zurndorfer says, is the feeling among investors that "the economy has not yet come back, especially when it comes to jobs. Unemployment is close to 10 percent, even though the report came out that unemployment dropped to 9.5 percent. That's probably still twice as much as it should be."

Overseas turmoil in European stock markets, which still are reeling from Greece's economic problems in recent months also was a factor in depressing returns on the I fund.

Turning to the L funds, Zurndorfer says they are more or less reflecting what has happened with the other TSP funds of which they are composed.

"The L 2030 and L 2040 were negative. The L funds that invest mostly in the G, E, and F funds, the L income and the L 2010 weren't bad, but they weren't exactly positive. So, the L income and L 2010 are just riding the storm, as it were, but by not very much," he says.

Zurndorfer says he is recommending that smart feds resist the urge to switch their TSP investments into the so-called "safe funds"-- the F and the G portfolios.

"It never works. You have to say to yourself 'I'm a long term investor. I'm going to ride this one out.' And my horizon here is from 20 to as much as 50 years. The long term trend is up," he says.

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