TOPICS
TOPICS
TSP international fund far outpaces others in yearlong returns
With July's returns as part of the equation, the yearlong performance of the Thrift Savings Plan's international stocks fund is now head and shoulders above that of its other funds.
The TSP, a $180 billion 401(k)-style retirement savings plan for federal employees, earned 0.98 percent for its international (I) fund last month, bringing that offering to a 24 percent gain over 12 months.
The I Fund, which invests in European, Australian and some Asian stocks, was the second-highest earner in July. The F Fund, composed of fixed-income bonds, earned 1.32 percent last month. But its 12-month earnings to date are only 1.42 percent.
TSP investments in common stocks listed on the Standard & Poor's 500 Index brought in a 0.65 percent return in July. The C Fund's 12-month earnings were the next highest after the I Fund's, but were considerably lower at 5.42 percent.
The S Fund, which is invested in the stocks of small- and mid-size American companies, was the only one to lose ground in July, falling 2.79 percent. The highly volatile fund still recorded a yearlong positive return of 5.35 percent, however, after losing 4.36 percent in May and gaining 0.47 percent in June.
The G Fund, the TSP's most popular and reliable investment option, earned a 0.44 percent return last month for a one-year gain of 4.84 percent.
In addition to the five basic fund options, the TSP offers five life cycle (L) funds, which are a compilation of the five underlying funds that automatically shift to become more conservative as an investor nears retirement.
L 2040, intended for employees with a target retirement date around the year 2040, gained 0.13 percent. The L 2030 Fund earned 0.20 percent; the L 2020 gained 0.35 percent; the L 2010 increased 0.37 percent; and the L Income, designed for employees with planned retirements in the very near future, grew 0.49 percent.
Yearlong returns were available for the L Funds for the first time. All the funds beat the G and C funds, with the riskier mixes earning more than the conservative ones. L 2040 had a 9.12 percent twelve-month return, L 2030 had 8.50 percent, L 2020 had 8.15 percent, L 2010 had 7.32 percent, and L Income had a 5.51 percent gain
COMMENTS
- Taxpayer, while I agree with your contention in paragraph one, I must beg to differ in your evaluation in paragraph two. With the price of gas high, the largest dollar import from foreign markets is continuously extending their lead, i.e. automobiles. Recent loss of market for all the Big Three American manufacturers combined upholds that belief. On the lesser side, with cheap foreign labor imported goods are increasing their sales in the dollar bargain stores and the huge Wal-Mart. Therefore, as things tighten, I think we will be consuming more imports and further eroding our own economy whether we know it or not. I don’t wish to be a “gloom and doom” and I do have at least 35 percent in the I Fund, but we need to concentrate a little on the home markets or we may be on the precipice of a drop we will not like. Tip off. Tip Posted August 22, 2006 11:10 AM
- Mark, I tend to agree with you but I think you overstate the case. The good performance of the I Fund is based on two things: 1. The value of the dollar is declining and that increases your dollar return because foreign stocks are valued in foreign currencies. Without the value of the foreign stock changing at all you gain from the decline in the dollar's value. 2. As the Fed has raised interest rates too high and the price of gas has risen, the U.S. economy is slowing. People either stop increasing their incomes or use more of the income to buy gas they stop buying imports. This causes a decline in the sales at foreign firms that sell to the United States and a drop in profit for those firms. This causes foreign stock prices to decline not increase. Your risk is that the decline in sales in the United States to foreign companies will drive down the value of your I Fund stocks more that the decline in the value of the dollar against other currencies. You have had the best of both worlds up until now but look out in the future you may face declining values in the I Fund that are not offset by drops in the dollar's value. Taxpayer Posted August 10, 2006 6:33 AM
- Investors forget that there is a world full of stocks and corporations outside of the United States. Europe, Eastern Europe, India, Asia, Japan, Latin America, all the emerging markets have blown smoke rings around the U.S. stock market in the last four years, and many analysts still believe foreign stocks will outperform U.S. stocks for the rest of the year and then some. Yes, foreign funds/stocks have taken a beating in the last two months, but investments like the I Fund should be looked at as long term investment strategy. I pity the one who doesn’t have a part of their portfolio in the I Fund, especially those in the FERS Plan. After all, diversity is the spice of life in investing and international stocks should have a position in that diversity if you can tolerate the volatility of the market. Remember, risk equals reward in market performance. Mark J Acton Posted August 3, 2006 9:36 PM
