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Shows & Panels
TSP Tip: Pain is a sign you are doing something right!
Wednesday - 3/12/2014, 3:31am EDT
Hundreds of thousands of federal and postal workers (and retirees) moved money out of the plummeting C, S and I Funds and into the super-safe G Fund. As it turns out, they bought high and sold low. Especially if they remained in the G Fund and didn't buy stocks which, as it turns out, were on sale.
Allan Roth, of CBS' MoneyWatch, says that the problem is that too many investors, in and outside of the TSP, let their emotions control their investment strategy. When stocks tanked, people panicked. Understandable but not, as it turned out, such a good idea.
Over the past five years Roth says that the S&P 500 (which the C Fund tracks) is up 177.6 percent. And that's only part of the full return, he writes, because the "indexes are only part of the market return, as they exclude dividends and leave out a majority of U.S. stocks," which are reflected in the TSP's S Fund.
People who bailed out of the C, S and I funds in 200 — the pit, so far — of the recession felt they had good reason. Roth said many predicted the next Great Depression and "feared for the future of capitalism." Though stocks were on sale, few were buying.
Prior to the recession many feds were demanding an R (for real-estate trust) fund because as Roth said, "The conventional wisdom was that real estate could never decline in value."
Roth believes that a "balanced portfolio" of stocks and bonds that rebalances regularly has "greater returns" than each of the components (U.S. and international stocks, and bonds). Does that sound like the TSP's Lifecycle funds?
So what next?
Today at 10 a.m., Roth will be our guest on our Your Turn radio show. He'll talk about emotional investing, how his 8-year-old son beat Wall Street (hint: money meant little to him!), and what he thinks is one of the most important lessons: "Neither good times nor bad times last forever."
NEARLY USELESS FACTOID
Compiled by Jack Moore
The first known use of steel drums in a theatrical performance (outside of Trinidad and Tobago) was in the 1954 Broadway musical The House of Flowers, with music by Harold Arlen and lyrics by Truman Capote. It would be another dozen years or so before steel drums made their first appearance in a pop song — "Carrie Anne" by The Hollies — in 1967.
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