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Investors in the government's 401(k)-style retirement savings plan showed some signs of shaky nerves after the steep drop in the Dow Jones industrial average Tuesday.

The Thrift Savings Plan Web site experienced increased traffic as participants checked their accounts, and the number of transfers among funds processed Tuesday night reached the fourth-highest level so far this year, said TSP spokesman Tom Trabucco.

The TSP processed 12,627 interfund transfers overnight, Trabucco said. Though that is well short of the highest number of transfers in 2007 -- 16,393 on Jan. 3 -- it is still a "pretty big number," he said, noting that there tend to be more transfers at the beginning of the year, because it is a standard time for participants to reallocate their investments.

Most of the transfers Tuesday night represented movement out of the three basic TSP stock funds and into the less risky G and F funds, which invest in government securities and fixed-income bonds.

Participants took $200 million out of the I Fund, which invests in international stocks. The fund closed at $22.67 Tuesday, down $0.74 from the previous close and up 0.71 percent for the month. Investors took about $109 million out of the C Fund, which tracks the Standard & Poor's 500 Index of stocks in the largest domestic companies. It closed at $15.53 Tuesday, down $0.55 from the day before and 2.51 percent for the month.

They also transferred about $109 million out of the S Fund, which invests in small- and mid-sized companies by tracking the Dow Jones Wilshire 4500 Index. It finished Tuesday at $19.24, down $0.65 from the previous day and 0.57 percent for the month.

Of the total amount moved out of these funds, about $370 million went to the G Fund, which did not change Tuesday and was up 0.34 percent for the month, and about $49 million flowed to the F Fund, which changed very little Tuesday and was up 1.71 percent for the month.

TSP officials, however, recommended against shifting money in response to short-term market fluctuations.

"We always advise participants to have a long-term investment horizon and to stick with that plan over the long term," Trabucco said.

Plan participants who are uncomfortable with the movement in the markets should consider placing their money in the life-cycle (L) funds, which invest in a mix of the basic funds that grows more conservative as employees near retirement age, he said.

Trabucco expects activity to remain elevated Wednesday. He said investors may have trouble logging on to their accounts on the TSP Web site, and if they do, they should try the TSP's toll-free phone number: 877-968-3778.

As of Wednesday afternoon, the markets were rebounding somewhat. The Dow Jones was up about 0.7 percent after a more than 3 percent drop Tuesday, and the S&P 500 was up about 0.8 percent, also on the heels of a more than 3 percent plunge. Tuesday's decline -- the steepest in about four years -- was precipitated by a drop in Chinese stocks.

COMMENTS

• “Cracked & Wired”, did I just see that dead cat bounce? Thanks for the heads up. Tip off GovExec.com reader Posted March 14, 2007 9:37 AM
• As of 3/5/2007, I have lost over $8,000 in the TSP, C, I and S funds. I’ll lose more today. I’m an annuitant also. I’m not sweating it either, history proves it. Two things folks, I’m not timing the market by pulling my money out now and neither should you. I’m staying put. Even though I’m not contributing to the TSP (CSRS Annuitant), the fund shares will eventually rebound and regain their loses. Unless you are a professional, and I mean professional market timer, it’s best to keep your shares as is, don’t panic; most market timers lose. If you hastily withdrew your money out after the correction started, you had no business being in equities to begin with, period. With gain comes risk, if you can’t stomach the market fluctuations, stay with the government fund and fixed income! You won’t need the Maalox and Pepcid AC. GovExec.com reader Posted March 5, 2007 5:25 PM
• Prior to August 2000 I had all my money in the market. I started moving it out in August, and eventually had it all in the G fund for a couple of years. That turned out to be a good decision for me, because the market tanked for quite a while, and I kept earning interest. I started moving money back into the market in late 2002, and now have only about 40% in the G fund, the rest in market funds. Currently my new contributions are going into market funds. The reason I didn’t move anything this time, is because this is likely a temporary dip in the market, and here is how I would LOSE money if I did that. To make the math simple, suppose I had $2,000 in the S fund (100 shares at $20/share). Let’s say the S fund dropped to $18/share. If I do nothing, then when the price comes back up to $20/share I will be where I was when it dipped, owning 100 shares at $20/share for a fund value of $2,000. Now suppose instead of waiting this out, I jump ship to the G fund. My 100 S fund shares that are currently worth $18 each allow me to buy $1800 worth of G fund shares. Let’s say the G fund is at $12/share, so I now have 150 shares in the G fund. Let’s say that holds steady, the S fund comes back to $20 and I feel comfortable investing in the S fund again. So, I take my G fund shares and move them to the S fund. My $1800 worth of G fund shares now will only buy 90 shares in the S fund (remember it is now $20/share). Instead if having 100 shares worth $10/share, I now have 90 shares at $1,800/share. I lost $200 by moving my money to the G fund and then moving it back. Even if the G fund grows to 12.02 (big growth for the G fund) during this time, my 150 shares are only worth $1,803 so when I move that back to the S fund, I still have lost $197. Be really careful about moving your money around for short term blips in the market. You will lose money that way. If you can’t stand any fluctuation, then consider putting it into the G fund and ignore the market fluctuations. GovExec.com reader Posted March 5, 2007 3:43 PM