What dollar cost averaging is all about

Monday - 10/27/2008, 5:02pm EDT

By Dorothy Ramienski
Internet Editor
FederalNewsRadio

Wall Street hasn't calmed down and the shaky markets are rippling throughout the world economy.

On Monday's Daily Debrief, host Amy Morris spoke with Tom Trabucco, Director of Public Relations for the TSP, who says it's been a pretty tough year.

Look at the Dow Jones being down 36 percent year to date -- [the] Wilshire 5000 [is] down 40 percent -- [the] NASDAQ [is] down 41.5 percent -- [and the] S&P 500 [is] down 40.3 percent.

Trabucco says the last month, in particular, has been very volatile.

We had that period two weeks ago -- coming to a head Oct. 10 -- where we had a lot of interfund transfer activity. We had 26,000 interfund transfers on Oct. 10 -- that was on a Friday -- and then on the Tuesday following that [the transfers] we actually up to 40,000. So, we are going to probably have one of our biggest months in quite a while for interfund transfers.

Despite all of the turmoil, Trabucco says things seem to have calmed down a bit, with about only 8,000 interfund transfers last Friday.

I think most of the folks who were going to be adjusting have adjusted. Most folks continue to ride it out. I know that some of the big investment houses have started putting advertising on TV that kind of reinforces the message that we have been talking about from the beginning, which is -- you've got to stay there through the ups and the downs.

Trabucco says, despite the fact that the TSP has been around since 1987, this current situation has been a first for the investment plan.

We have not [always] had . . . daily interfund transfers. We've only had that now for five years. So this is really our first down market for when we have had interfund transfers that can be executed the same day. They used to be stacked up and they were all exectued at the end of the month. So there was very little activity then.

Trabucco says one of the reasons the TSP moved to daily interfund transfers had to do with spreading the workload out over the course of each month.

In addition, he says he and other TSP officials are sticking by their advice to investors: stay the course and don't panic.

Keep those contributions coming in, because remember your dollar cost averaging in -- and right now you're buying low. . . . That's what your supposed to be doing. That's what dollar cost averaging is all about. Right now you're buying a share in -- let's say the L funds -- for 20 percent less than it cost this time a year ago.

You can always track your TSP's progress by logging on to federalnewsradio.com and looking for the Thrift Savings Plan Ticker on the homepage.

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