After an early-year plunge in the financial markets as the pandemic hit, the stock-based TSP funds recovered to post a strong year in 2020, with the small company stock S fund up 31.85 percent, the large company stock C fund up 18.31 percent and the international stock bond fund up 8.17 percent. Gains in December were 7.24, 3.84 and 4.64 percent, respectively.
The bond F fund meanwhile gained 7.5 percent for the year and the government securities G fund 0.97 percent, following gains in December of 0.14 and 0.07 percent, respectively.
The December and full-year returns for the lifecycle L funds that were in operation for the entire year were: Income, 1.07, 5.15; 2030, 2.79, 11.26; 2040, 3.34, 13.16; 2050, 3.83, 14.79.
The other L funds began only in July and no cumulative returns were posted for them. In December, they were: 2025, 2.27; 2035, 3.06; 2045, 3.59; 2055, 2060, 2065, 4.63. On an annual basis, their returns would have fallen about half way between the funds on either side of them—for the 2035 fund, for example, the 2030 and 2040 funds.
The TSP Concludes a Strong Year
The G Fund indeed was the worst-performing fund for the rest of the year. Anyone who stuck with a diversified portfolio, or used a contrarian tactical approach, did quite well in 2020. (Although not part of the TSP mix, the best performing asset class in 2020 ended up being cryptocurrencies.)
The G Fund is Underperforming Inflation
If TSP investors leave money in the G Fund, it is guaranteed not to lose money nominally, but slowly chips away at purchasing power at current rates. On the other hand, if they invest heavily in the equity funds, they have more upside exposure, but also a lot more volatility risk.
What it Takes to Be a TSP Millionaire
…in inflation-adjusted dollars.