TSP Snapshot: September bounceback, and the C Fund, examined…

Tuesday - 10/12/2010, 7:17am EDT

WFED's Max Cacas

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By Max Cacas
Reporter
Federal News Radio

Long-time investors in the Thrift Savings Plan know that the best strategy for retirement investing is one where looking at the long-term is the key.

That was proven in the month of September when the TSP rallied back from a less than stellar performance in August, according to Art Stein, a certified financial planner with SPC Financial in Rockville, who says the keyword last month was "recovery".

"September was a great month for stocks," Stein told Federal News Radio. "So the three stock funds, the C fund, the S fund and the I fund, had just a great month. And actually the C fund, which replicates the S&P 500, had the best September since the S&P 500 was started in 1957, and that's good because August was a bad month."

Stein says the C fund was up 9 percent, the S fund more than 11 percent, the I fund was up almost 10 percent. He reports the F fund was up marginally, and the G fund was up its usual .2 percent.

Over the last 12 months, Stein reports good returns for the C and S funds, (C fund up 10%, S fund up 17%.) He says the I fund over the same period was up 3%, and the F fund, which is a bond fund, is up 8%.

Stein goes on to say that the L funds are all up for the past month, with the 2040 and 2030 funds doing especially well, up 7-8%. The L-income fund was up about 2% for the month. In the past 12 months, the L income fund was up 5 %, the 2040 fund was up 9%, as was the L 2030 fund. September was only one of three months this year, he adds, in which all of the funds of the TSP has a positive rate of return for the year.

Beginning this month, "TSP Snapshot" begins a series of close-up looks each month at the different funds of the Thrift Savings Plan, beginning with the C Fund.

Stein says the C fund was introduced into the TSP 22 years ago.

"It is an index fund," he explains, "which means it is not actively managed. They don't have a set of managers who are trying to pick the stocks to buy and sell every day in the fund. The C, the S, and the I fund are all index funds."

Stein goes on to say that with an index fund, the TSP board has chosen a particular index, and with the C fund, it's the S&P 500.

"They've hired a company, in this case, the Black Rock Institutional Trust Company, to manage it, and they're just trying to replicate the performance of that index."

Stein says that although savvy investors will note a similarity between mutual funds and the C fund, in fact, they are not mutual funds.

"They are trust funds," he says, "and as a consequence, they are not regulated by the SEC, they're regulated by the Comptroller of the Currency, and they don't have ticker symbols."

Asked about how the C fund has performed historically as an investment vehicle, Stein says that over the last ten years, both the C fund and the S&P 500 have averaged a minus .9% per year. Had the C fund been in the TSP over the last twenty years, he says, the picture brightens somewhat, since the S&P averaged 8% a year, which he calls "a great return", outperforming bonds and international equities.

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