Meet the S fund

Learn about a new TSP fund, available in May, that covers a diverse range of companies.

Nuts-and-bolts information about the Wilshire 4500 is available on the . Want to keep an eye on the Wilshire 4500 index and the EAFE index (which the I Fund will track)? Look no further than . You can follow daily performance of the two indexes on the TSP Ticker on . The Federal Retirement Thrift Investment Board is developing a new record-keeping system for federal workers' TSP accounts. When the new system is completed, employees will be able to see the changing value of their personal accounts on a daily basis. The board and its contractor, American Management Systems of Fairfax, Va., originally planned to complete the new system by May 2000. That date was pushed back again and again as system testers found more and more bugs. Now the board and AMS won't commit to a target completion date. The board is publishing a monthly update on the system's progress. It's not looking good. As of February, more than 11,300 bugs had been discovered. About 2,600 still have to be fixed. That's virtually unchanged from the January update. If you're enrolled in the Civil Service Retirement System, keep your eye on , a bill that would get rid of the Social Security windfall elimination provision. The provision, which has been a law since 1983, reduces Social Security benefits for people who spent most of their careers working for the government and part of their careers working in a job covered by Social Security. A explains the provision in more detail. Rep. Max Sandlin, D-Texas, introduced H.R. 848 last week. The bill has 25 co-sponsors so far.

Financial planners often tout the importance of diversifying your investment portfolio. Rather than invest all of your retirement money in one place, you should invest in several places, the planners say. In the average private-sector 401k plan, employees have more than 11 investment options, the Profit Sharing and 401k Council of America reported last year. Most of those options are stock funds. The federal Thrift Savings Plan, the government's 401k-style program, has three options, only one of which is a stock fund (the C Fund, which invests in common stocks and tracks the S&P 500 index). Beginning in May, federal workers will have two more stock investment options, the I Fund, which Pay and Benefits Watch described last week (Meet the I Fund), and the S Fund. The S Fund will invest in small- and mid-sized companies' stocks. It will track the Wilshire 4500, an index that follows the performance of--despite its name--6,200 firms. It includes stocks that are not included in the S&P 500. The S&P 500 follows the performance of 500 major American companies; the Wilshire 4500 includes everything else. The Federal Retirement Thrift Investment Board, which manages the TSP, explains the S Fund this way: "Although the S Fund will be diversified among industries and companies, losses will occur if and as the value of the Wilshire 4500 index declines in response to changes in overall economic conditions. The Wilshire 4500 index returns tend to fluctuate more than S&P 500 index returns because the prices of the stocks of the smaller companies in the Wilshire 4500 index tend to react more strongly (positively and negatively) to changes in the economy. Therefore, S Fund investments are expected to be more volatile than C Fund investments." The table below shows the Wilshire 4500's performance in comparison to the C Fund's performance.

Annual Returns
Year C Fund S Fund
1988 11.84 20.50%
1989 31.03 23.90%
1990 -3.15 -13.60%
1991 30.77 43.50%
1992 7.7 11.90%
1993 10.13 14.60%
1994 1.33 -2.70%
1995 37.41 33.50%
1996 22.85 17.20%
1997 33.17 25.70%
1998 28.44 8.60%
1999 20.95 35.50%
2000 -9.14 -15.60%
Wilshire Web siteTrack the I and S's home pageTSP ModernizationWindfall EliminationH.R. 848Social Security Administration publication