John Grobe

The year-end TSP fund returns have been posted on the TSP website, as well as many other places. Soon the Thrift Board will announce the weighted, cumulative ten year returns which no-doubt will show the I Fund surpassing the C and F funds in ten year returns, despite its annual return of <13.43%>.

So, for the ten year period ending on December 31, 2017, the I Fund was in fifth place out of the five basic funds. For the ten year period ending on December 31, 2018, the I Fund finds itself in third place out of the same five basic funds. Does this mean that the I Fund had a great year in 2018? Heck no! The I Fund had the worst record of all five funds in 2018!

Do statistics lie? No, if you view statistics as what they are – snapshots in time – they are accurate. It is possible for a fund to have recent poor performance and still look like a good investment in the long run. The reason the I Fund leapfrogged the G and F funds in the ten year statistics had nothing at all to do with its 2018 performance; it had everything to do with the fact that 2008 (a terrible year for all of the stock funds) when the I Fund lost over 42%, is no longer included in the ten year average returns.

If I were to tell you that the C Fund had earned an average annual return of 10.53% from its inception in January of 1988 through December 31 of 2017 it would be a true statement. This represents the latest information available in the C Fund’s “fund sheet” that was available on the TSP website at the time I put this article together.

However, statistics don’t tell you a thing about what the future holds. Let’s look at the C Fund statistic mentioned in the preceding paragraph. It is true, but so is the statistic that the C Fund lost 36.99% in the year 2008 or earned 32.45% in 2013. A financial adviser who wanted you to invest in an equity indexed annuity would likely focus on the 2008 number. An adviser who believed in a “buy and hold” strategy would focus instead on the long term return of the fund (i.e., the “since inception” statistic from the first paragraph of this article). And both of them could be wrong.

So what should you do? First and foremost, take all statistics with a grain of salt; do not assume that a statistic has any predictive value. Second, develop your own strategy; perhaps with the assistance of a financial planner. Third, realize you are in the TSP for the long haul; continue to contribute as much as you can. And finally, remember Yogi Berra’s quote: “It’s difficult to make predictions, especially about the future”.