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Iced: TSP drops slightly as pay freeze looms
Friday - 12/3/2010, 10:31am EST
Federal News Radio
November's Thrift Savings Plan returns were mostly down. The F, I, and all of the L funds saw slight decreases from October.
Arthur Stein, certified financial planner with SPC Financial, told the Federal Drive that federal employees should not let one month's returns drastically change their allocation amounts.
"It is very psychological. Unfortunately, the average investor does react emotionally and they're much more likely to buy something after it's increased in value and sell after it's declined in value. That's just a formula for losing money," Stein said.
Federal employees should determine an appropriate allocation for the TSP funds and then "stick with it unless there is some kind of major change." Stein added, "What happened last month is not major."
The F Fund, generally considered a "safe" investment, had a 0.57 percent drop last month. The fund is tied to the value of bonds. As interest rates increase, the value of the bonds decreases. A fund like this would be risky outside of the TSP, but a lot of the F Fund is backed by government bonds, Stein said.
"I don't really expect the government to default on those," he said.
The only "really safe" investment is the G Fund, which does not fluctuate very much, Stein said.
Despite the nearly across-the-board negative returns, one piece of good news is the C Fund for the first time has a positive return over the last 10 years, Stein said.
As the possibility of a two-year pay freeze looms, Stein recommends that people put more into an emergency fund and investments.
"You might need more investment to make up for slightly less annuity," he said.
Thrift Savings Plan November returns
|Fund||G Fund||F Fund||C Fund||S Fund||I Fund|
|L Funds||L Income||L 2010||L 2020||L 2030||L 2040|