April Showers Rain On TSP Gains

The TSP started the year off with a bang – boasting the best first-quarter returns since 2019. But April rained on that parade, leading to a decline in four of its five core funds. Diversifying your investment among the core funds can help you create a TSP investment strategy to weather the storm, outpace inflation, and provide long-term growth.

Government Securities Investment Fund – G Fund: The G Fund is a unique offering available only to federal employees who invest in the TSP program. Since the payment of principal and interest is guaranteed by the federal government, the G Fund offers the lowest risk level of any of the funds. The downside, it has historically offered the lowest rate of return as well. G Fund returns for April and YTD* are .35% and 1.41% respectively.

“When investing for the future, remember that short-term pain can still result in long-term gain.”

Fixed-Income Investment Index Fund – F Fund: If you like to keep your risk low but want a bit more growth, consider the F Fund. An index that invests in debt instruments such as bonds, asset-backed securities, and treasury and government agency securities, it generally pays a greater monthly interest than the G Fund. The downside, unlike the G Fund, it doesn’t guarantee the return of your principal and higher interest rates – like we’re experiencing now – lead to a decrease in the fund’s value. F Fund returns for April and YTD* are -2.47% and -3.20% respectively.

Common Stock Investment Fund – C Fund: Even if you’re not a savvy investor, you’ve likely heard of the S&P 500. It’s a more conservative index comprised of 500 large and mid-cap companies including Apple, Microsoft, and Amazon. While its April return was greatly impacted by market volatility, it’s the only core fund whose YTD return is outpacing inflation. C Fund returns for April and YTD* are -4.08% and 6.03% respectively.

Small-Capitalization Stock Index Fund – S Fund: This fund mirrors the U.S. Completion Total Stock Market Index, which gives a more accurate snapshot of the stock market by including around 4,500 smaller companies that might not be included in other indexes. One of the highest-risk funds in the TSP, it was rocked by April’s volatile market. S Fund returns for April and YTD* are -6.46% and .01% respectively.

International Stock Index Investment Fund – I Fund: Another higher-risk fund, the I Fund is based on the Morgan Stanley Capital International EAFE Index, investing in larger, established international companies across 21 developed markets in Europe, Australasia, and the Far East. I Fund returns for April and YTD* are -3.17% and 2.60% respectively.

When investing for the future, remember that short-term pain can still result in long-term gain. Even though the C and I Funds didn’t perform well in April, their YTD returns are still higher than that of the G Fund. Feeling overwhelmed and unsure which combination of funds is right for you? Contact an FRC® trained advisor in your area for a strategy that’s tailored to fit your needs.

*YTD as of 5/1/2024