Investors in both the Thrift Savings Plan and private sector funds have been wary since the stock market crash last year, but are things looking up overall for the market?
There’s no way to really predict the future, but Tom Trabucco, Director of External Affairs for the Federal Retirement Thrift Investment Board, talked about what it means to be an active investor on Monday’s Daily Debrief.
“[An active investor] is somebody who changes their stock position, generally, based on the anticipated market movement. These are folks who look ahead and rather than being in the mode where they just want to diversify and track the markets, they sense that things are starting to happen and they might want to go a little bit heavier in the stocks and out of bonds.”
Trabucco says this type of investor also has a goal of “beating the market,” which can actually be done with the TSP.
“As you know, we have the five investment funds, so if you anticipate that large cap stocks are going to have a good performance in the coming weeks or months, you can move more of your funds into the stock market and into the C fund, particularly.”
He notes that this is, in fact, already happening. The second quarter has, thus far, been full of good news for investors and TSP participants are taking advantage of that by moving money from safer funds, such as the G fund, into riskier funds like the C.
“Folks were transferring money out of the C fund every month, net, last year — and every month this year through March; however, beginning in March and for April and May and into June, it was a net [amount] going into the C fund via interfund transfers.”
There is more money going into the various stock market funds through contributions now, as well, when compared to a few months ago.
“In January of last year, 33 percent of new contributions were going into the G fund . . . with 27, 9, and 13 percent, respectively, going into the C,S and I funds. In March of this year, 47 percent of the money was going into the G fund, so that’s a pretty big upturn of folks who were getting their contributions out of the market and putting it into the safety of government securities. That number has trimmed a bit and it’s back to 45 percent.”
There are those investors who did decide to stay the course and leave their money alone. Trabucco says this might have been a better alternative than taking it out and performing interfund transfers.
“If you miss just one or two or three big days in the market over the course of a year, you may miss out on positive returns for that entire year. . . . The TSP is set up to work best [so that] you have these broad, diversified funds and that you track the market over the long haul. Remember, the market reacts to all kinds of inputs that it gets from millions of investors every day making tens of millions of decisions. So what you really do is benefit from all of those decisions that are being made by other folks who are following the market very closely.”
He reminds all investors to look at what is best for them individually and not rely solely on blanket statements about investing.