- The Washington Times - Tuesday, April 10, 2007

When the stock market dropped last month, federal investors pulled 10 percent of their retirement savings out of the Thrift Savings Plan’s international stock index fund and moved it to the supersafe G Fund that holds special U.S. Treasury securities.

Now that the market is nearly back to its pre-Feb. 28 levels, some financial planners think the folks who bailed out of the international and small-cap funds may have made a strategic mistake: It’s possible that they sold low and will wind up buying high when — and if — they return to the I and S funds. This, in long-range investing for retirement, is not recommended.

Financial planners say that people investing for retirement should re-evaluate their portfolios once or twice a year, but avoid chasing high returns or reacting to the ups and downs of the stock markets.

The good news, the TSP director says, is that most federal and military investors appear to have adopted a long-term strategy. Only one in 10 investors changed funds during the early days of the market downturn, said Greg Long, executive director of the Federal Retirement Thrift Investment Board, which administers the $213 billion plan.

The February market meltdown was a result of problems with the Chinese stock market, comments by former Federal Reserve Chairman Alan Greenspan and two stock market computer glitches, which made it appear that a daylong market decline had taken place in a matter of seconds.

A Bethesda-based financial planner said “only one of my federal clients panicked” and jumped out of the S and I funds.

“He made a mistake to the extent that he sold lower than the value of the shares the day, week or month before. If he waits until the market is up to go back in,” the financial planner said, “he will buy high.”

Figuring when the market has peaked or bottomed out, he said, is virtually impossible “because you have to be exactly right twice” when you guess.

Although many investors moved to the safety of the lower-yielding G Fund, most have stuck with the higher-risk/reward funds. As of Friday, the C Fund that tracks the Standard & Poor’s 500 Index was worth $72 billion, the same amount as the supersafe G Fund. The international stock index I Fund was worth $21 billion, the S Fund that tracks roughly 4,500 small and midcap U.S. stocks was worth $16 billion and the bond-index F Fund was valued at $10 billion.

In addition to the C, S, I, G and F funds, the TSP also offers target-date funds. These so-called L (for life cycle) funds range in value from $1 billion to $7 billion. Their portfolios are adjusted for risk based on the length of investment time and become more conservative as investors approach their target date.

Mike Causey, senior editor at Federal News Radio AM 1050, can be reached at 202/895-5132 or mcausey @federalnewsradio.com.


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide