Goldilocks and the 3 TSP funds

Are you excited, dazzled and worried — sometimes at the same time — by the stock market boom? Are you concerned about what many experts say is a long-overdue market correction? Do you still have the occasional nightmare about the Great Recession? If so, welcome to the club.

Obviously, nobody knows when, if and for how long any correction might be. But we asked financial planner Arthur Stein for his take. He’ll also be my guest today on our Your Turn radio show at 10 a.m. We asked what’s happening and what’s next. This is what he said:

“This has been a ‘Goldilocks’ period for the TSP funds and U.S. economy. Not too hot and not too cold, resulting in lots of positive investing news. For instance, TSP stock fund prices increased while volatility was at record lows.

Over the last 12 months, the stock funds (C, S and I) increased about 19 percent. Bond fund (G and F) returns lagged far behind. TSP Fund Returns as of Sept. 30, 2017

Recent TSP Fund Returns as of Sept. 30, 2017
MONTH G FUND F FUND C FUND S FUND I FUND
YEAR TO DATE 1.7% 3.4% 14.2% 12.8% 20.3%
LAST 12 MONTHS 2.2% 0.3% 18.6% 19.2% 19.5%
   Source: TSP.gov. Returns rounded to tenths of a percent.

There was plenty of bad news that could have negatively impacted the TSP funds, but didn’t: escalating tensions between North Korea and the U.S., destruction from three very powerful hurricanes, clashes between protestors in Charlottesville, Virginia and political turmoil in Washington.

The stock markets seemed to reflect more of the positive news, such as strong corporate earnings, an expanding U.S. economy and low inflation and interest rates.

During such a blissful period for investors, it is important to remember that stock and bond markets go down as well as up. According to Jason Zweig in the Wall Street Journal: ‘The longer markets go on producing decent performance at little apparent risk, the more investors come to believe that high returns must be a kind of entitlement.’ Meaning, many investors forget that a greater than 20 percent stock market decline is long overdue, based upon historic averages. Of course, past performance is no guarantee of future performance.

Knowing that a decline is somewhere in the future may keep you from reacting emotionally when the decline occurs. You don’t want to be an investor who withdraws money from stock funds after they decline and doesn’t reinvest when the markets hit bottom.”

Arthur Stein

Got questions? Email them to me before showtime (10 a.m. EDT). We’ll get you some answers.

Nearly Useless Factoid

By Michael O’Connell

Since Yellowstone National Park was established in 1872, eight people have been killed by grizzly bears in the park.

Source: NPS

Read more of Mike Causey’s Federal Report