Roiling world markets haven’t exactly greeted the news of the U.K.’s vote to leave the European Union with cheer and confidence.
But as markets dropped around the world, the U.S. government’s Thrift Savings Plan, a defined contribution plan for civil service employees and retirees as well as for members of the uniformed services, cautioned federal employees not to be caught up in the hysteria.
Federal News Radio reported that the TSP posted on its website that participants should “stick to your plan” and “avoid chasing returns.”
Market timing, it warned, was a risky business, particularly in times of turbulence: “An investment strategy of chasing returns or trying to ‘time the market,’” the TSP wrote, “means you have to be consistently correct two times: exactly when to get out of a particular asset class and exactly when to get back in. Most investment experts agree that such success is highly unlikely over long periods.”
Pointing out that the investments in one’s retirement portfolio should be based on a participant’s “willingness and ability to take risk,” the TSP said that participants should “periodically” ask themselves whether that is the case. However, even if it is not, the time to adjust investments is not “when the market starts to dip.”
It’s quite obvious that investors the world over are reevaluating their own risk tolerance and reacting to events, rather than sticking with a strategy that works over the long term.
Participants in the TSP have a range of investment choices that include the G Fund, the assets of which are managed internally by the Federal Retirement Thrift Investment Board. The G Fund buys a nonmarketable U.S. Treasury security that is guaranteed by the U.S. government, and thus, according to the TSP website, “will not lose money.”
Other investment choices — the F, C, S and I funds — are managed by BlackRock Institutional Trust Co. Each of these is an index fund.
Last but not least are the L Funds, which are invested in the five individual TSP funds based on professionally determined asset allocations.
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