Don’t Discount the Importance of Measuring the Performance of Your Thift Savings Plan Against Other Viable Options
Managing a retirement account is a complex and difficult procedure – so is keeping track of savings and investments. Individuals who want to secure their finances in the future might decide to invest their money in a savings fund. However, they will always look for a plan which guarantees profitability.
Investing money with the hopes of earning a stable post-retirement income requires investors to continuously gauge the performance of their savings plan in order to decipher how beneficial it actually is. Experienced investors are fully aware that there is very little room for experimenting when it comes to securing funds, and there is always an equal probability of the investment yielding great profits, or bearing an even greater loss.
While there are several savings plans that promise to be the best of their kind, it is difficult to nominate one. What is more difficult, after selecting saving fund program, is measuring the performance of the fund, and scrutinizing every little aspect of the returns it yields.
Here is a review of the performance of a TSP investment strategy over the past year, its current progress, and future forecast. In addition, an explanation of different ways to measure the performance of the TSP has been provided.
The Recent Performance of the TSP
The wide range of foreign and domestic stocks in the TSP C Fund, TSP S Fund and TSP I funds are not doing considerably well compared to how they did a couple of years ago. The previous year (2015) was notably not a good year for the Federal Thrift Savings Plan. This was because investors who had invested in the C and S funds, ignored the deadlines and did not sell, gained enough growth, last year, to enjoy a significant increase in the values they had invested, initially.
The S fund proved to be the most unfavorable in 2015. With an annual return of -2.92%, which was significantly lower than what it had been in the previous years. Foreign stocks also went down, yielding a -0.51% of annual return. The G fund was the only one which showed some progress, with a return of 2.04% monthly. As a result, 2016 is experiencing the after effects as progress remains slow. It is safe to say that the current year does not seem very promising but some strategists still have their hopes held high, and are expecting things to improve considerably if investors make decisions for the long-term.
Why It Failed?
The reason why 2015 didn’t turn out to be a successful year for investors is because most investors were short-sighted while making their decisions. Since the average investors made sure that they met the deadlines, and were very responsive to any changes in the market, the overall values of all funds fell. Experts believe that short-term trends can in no way, depict long-term performance of the TSP funds. Experts also believe that past performance can never guarantee future performance; the market may decline for a short time but it is irrational to assume that it will never rise again.
Strategists believe that most investors tend to judge the long-term performance of the stock market based on short-term market trends, and the reason why the graph continues downhill is because investor behavior has become predictable. This predictability has made the TSP funds decline over the past year, and even now, there are no significant signs of improvement. The average investor is bound to buy rapidly as soon as they see a rise in the value of the C and S funds. Similarly, the average buyer is expected to always sell, as soon as the C and S funds show even the slightest decline in value.
What Can Be Done?
To ensure profits, C and S fund investors need to purchase and sell at the right time; as hasty decisions will always result in an unfruitful venture. In order to truly benefit from the investments, individuals need to wait for a considerably long period of time before selling off. The uproar and volatility of the market can only be curbed if investors start holding back and being patient. Many investors are attracted towards the Lifecycle funds because their ability to self-adjust themselves, but these funds can be too conservative. The L income fund is likely to yield the lowest returns and might be subject to a loss in purchasing power due to demand-pull inflation.
The Thrift Savings Plan is currently offering ten investment funds to civil servants all over the U.S. The performance of all these funds can be measured and compared easily, in order to get a clearer picture of their profitability and fruitfulness. Among the ten investment funds, five are U.S. and international bond and stock index funds. These funds can be categorized as those which duplicate the performance of broad market index.
How to Measure TSP Performance
In order to measure the performance of their TSP, individuals can adopt various strategies; the most popular of which is the method of comparison. Since the TSP funds are purely private, and cannot be traded over on the stock market, or sold through a market exchange, TSP account holders can gauge the performance of their fund by watching other funds and ETF’s that have a close resemblance to their own, and comparing the two of them.
For this, people need to develop a basic knowledge and understanding of the significant symbols that indicate performance. The plan also allocates a computerized profile for TSP account holders, which can be accessed by logging in with username and password. Here, users can easily see how their funds are doing from the investment point of view and how profitable they are. TSP holdings can also be adjusted in order to meet the individual requirements of account holders. Individuals can choose between diversifying amongst their funds or, if there is a certain department that they prefer, they can easily weight their holdings towards the specific market, which they believe might be more profitable.
The Use of Specialized Software
Another way to measure the performance of a TSP fund is through the use of specialized software. There are several charting software programs available which can present a clear picture of how an individual’s TSP fund is performing. While the most specialized software has to be purchased, and will provide a precise and accurate indication of the fund’s performance, some software are available for free downloads or can be used online. TSP account holders can greatly benefit from the use of performance-gauging software in order to determine the productivity of their funds.
Investment software works perfectly when it comes to measuring the TSP fund performance. This software works by using a method of technical analysis. It takes the conventional strategy of performance gauging a step further by not only providing the primary information of the funds and comparing it to similar funds on the market, but also by providing recommendations to account holders, based on the movement and profitability of the funds. This in depth analysis is the most detailed and precise way to measure the performance of a TSP account.
TSP Forecast For 2016
The Thrift Savings Plan consists of an elaborate portfolio that incorporates a diversified range of individual bonds and stock. While most Wall Street experts believe that 2016 might show an upward trend, with conditions becoming more favorable for the State and for investors, they are still concerned about the volatility of the market. With a much greater volatility, compared to the present being expected, a passive investment in TSP funds without any responsiveness to market shifts is considered an appropriate saving strategy for a peaceful retirement.
Whether they be hopeful or hopeless about the future outlook, most experts and strategists have agree that this year will be an important one for the TSP funds. The current year may likely see drastic changes in values. In 2016, TSP investors should expect share prices to rise or drop sharply, either bearing great profits for investors or massive losses.