If you’ve been a TSP investor for a while, you know that its C, S, and I funds — linked to U.S. and foreign stock markets — are rising.
And down.
But mostly up.
At least so far.
But because we’re human and survivors, the dips, however brief, tend to take on greater significance in the investor/survivor part of our brains. And almost everyone has heard that while past performance is no indicator of the future, many people get very nervous very quickly when a downturn lasts for a while. Carousels are less stressful than roller coasters. It’s called being human. And while there’s no guarantee it will continue, most of the 100,000+ TSP millionaires have one thing in common: the ability to buckle up and know the ride is going to be bumpy at times.
The group of self-made millionaires includes people of all ages, backgrounds, education and professions. However, most of them have one thing in common: they have invested exclusively or heavily in equity-indexed funds for an average of 29 years. And most stayed with the C, S, and I funds during tough times, like the Great Recession of 2008-9, which prompted many TSP investors to seek the “safe haven” Treasury Securities G fund. And staying there even though the market has been mostly up for record periods. People who continued to buy C and S funds, particularly during downturns, did well. Stocks they bought to sell are now worth a lot more. Some TSP investors have amassed $2-3 million worth of accounts. Not by making the big bucks, but by investing for the long term. One of them, Abraham Grüngold, has just retired. Today he is a full-time financial coach. Some of his clients are TSP millionaires. Others want to be. So did he follow his own advice? We asked him if he would like to ride the TSP roller coaster. And this is what he replied:
TSP 2022: What type of investor are you?
“The savings plan was at its all-time high at the end of December 2021. In January and February 2022, she fell into a nosedive. It reminds me of the Jurassic Park ride at Universal Studios, which takes a violent plunge right into the water. Those watching below will immediately make their decision to either ride or avoid.
So if you’re in the TSP, what kind of investor are you? There are two types of TSP investors. First, the roller coaster riders who understand that the stock market will have its ups and downs, twists and turns, and know that there is uncertainty as to when that will happen. They know the ride can be bumpy during the year, but they understand that TSP recovers and continues to grow over time. They contribute to their TSP for 25 to 30 years and ignore any downturns in the market. They don’t sell when the market is down, they keep buying. The roller coaster riders are likely to become the TSP millionaires because there is no reward without risk.
Second, there are the TSP investors who are the carousel riders. You don’t want to take any risks in the market and you don’t want to experience any stress. They’re the ones who invest their entire federal careers in the G Fund. They love the smooth, easy ride and listening to the music. There is nothing wrong with the carousel driver strategy. I have many friends who take this conservative approach to investing. You sleep well at night knowing your account won’t fluctuate. However, they cannot hope to reach a million dollars in their TSP account.
We are still in a bear market. As many companies begin to recover from the pandemic, we face another crisis: the Russian invasion of Ukraine. And this has added pressure from financial markets trying to recover. When is there an upleg or a bull market? Half of the experts say no recovery, the other half say soon, possibly in the third or fourth quarter of this year.
Even though this year has brought a downtrend in the market, I see it as a buying opportunity. I continue to buy in both my TSP and personal IRA and have been investing aggressively. On March 1st I retired from the federal civil service and made my last contribution to the TSP. When will TSP return to its all-time high? I don’t know that answer, but once companies return to full production and the pandemic subsides, markets will accelerate even more than before. The war with Russia and Ukraine will certainly have an impact on international markets. US consumers will feel the pain of oil and gas prices.
Last year clients contacted me about their TSP and asked if the government debt ceiling and pandemic-related supply shortage would cause their TSP to drop even further. Now the war in Ukraine worries them. There is no crystal ball to tell you when financial markets will reverse. As a roller coaster rider, you just have to persevere and be optimistic. Surviving the difficult moments in the market will lead to recovery and you will end up doing better than before the start of the financial crisis.
My clients have many questions about their FERS pension and TSP. I have many clients who are TSP millionaires and many who want to be TSP millionaires. I discuss their contributions, investment risks and strategies regarding the TSP. Everyone has their own needs and fears. Do not be afraid; Just enjoy the ride no matter what type of investor you are.
If you have any questions or comments, please contact me at Abraham Grungold – AG Financial Services or on my Facebook page at FERS Federal Employees
Comments are closed.