Investment Tip: Build or buy a time machine

When it comes to investing (and most other things), hindsight is 20/20. But when it comes to predicting the future, it is more like rock climbing when it is pitch black.

In 2007 and 2008, tens of thousands of federal and postal workers, and many, many retiree investors pulled money out of their Thrift Savings Plans’ three stock funds: C-Fund, S-Fund and I-Fund.

They couldn’t take the stomach-churning news (especially on the 24/7 cycle) which, for a long time, was all bad. Many sought the safety of the treasury securities G-Fund. While it never has a bad day, it rarely has a really good one either.

Some financial planners warn that people who invest exclusively in the G-Fund run the risk of seeing inflation eat into, and eventually eat up, their TSP balance.

Currently (as of December 2014), the federal TSP is worth a total of about $437 billion. In 2007, it was worth $231.6 billion, but by November 2008, it had bottomed out at $198.5 billion.

The hindsight knowledge is interesting, but where do you go with it? If you pulled out of the TSP stock funds in 2007-08 or 2009, was that prudent and wise? Or did you sell low and, if you return now, will you be buying high? Should you wait for another drop/correction in the market?

Today at 10 a.m., on our Your Turn radio show, we’ll talk with Arthur Stein. He’s a financial planner based in Bethesda, Maryland. Many of his clients are TSP investors.

Although past performance is no indicator, lots of people pay attention to what the market — and their favorite stock funds — have done before.

Stein said that the 10-year average annual rate of return (as of December 2014) for the super-safe G-Fund was 3.2 percent. That compares to 4.6 percent for the international stock I-Fund; 9.4 percent for the S-Fund (small cap); 7.7 percent for the C-Fund (which tracks the S & P 500) and 4.9 percent for the F-Fund (bonds).

Stein also warns that being too cautious can actually be dangerous. He’ll talk about why he thinks it is a mistake for many federal investors to have all or most of their money in the super-safe G-Fund. Especially after they retire.

The show is 10 a.m. today (EDT) on 1500 AM (in the Washington area) or streaming at www.federalnewsradio.com.

NEARLY USELESS FACTOID:

By Michael O’Connell

According to Stanley Coren, a professor emeritus at the University of British Columbia, traffic accidents increase in Canada by 5 percent to 7 percent in the three days following the spring Daylight Saving Time.

“After the fall Daylight Saving Time, however, there is not always a decrease in the number of accidents because people do not always use the extra hour to sleep,” Coren said, in an interview.

Despite these facts, Coren goes on to say Daylight Saving Time actually saves lives in the long run.

“Over the time that Daylight Saving Time is in effect people get up and return home while the highways are brighter,” he said. “This occurs over a period of months, so although Daylight Saving Time causes an initial hazard, in the end there is a life-saving benefit. There is nothing that comes without its cost, and in this case the cost of saving lives in the long-term is losing lives in the short-term.”

Thanks to Bob Carr for this Nearly Useless Factoid!

Source: The University of British Columbia

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