TSP board tells feds not to panic over Brexit vote

Without once mentioning the word “Brexit”, the Federal Retirement Thrift Investment Board today warned federal employees against panicking over big swings in the stock market following the United Kingdom’s vote to leave the European Union.

The unexpected election result produced a dramatic drop in the value of the pound, followed by a steep decline in stock markets around the world.

The TSP board advised feds to stick with their existing plans rather than attempting to “time” the market:

keep-calm-and-leave-your-tsp-aloneOnce you’ve established your retirement goals and a savings strategy that fits your needs, you’ll have the best results if you stick to your plan. Don’t get sidelined by distractions. Make adjustments to your strategy only after careful consideration.

It’s always a good idea to periodically ask yourself whether your retirement portfolio properly reflects your willingness and ability to take risk. But if you are certain about the amount of risk you can tolerate, don’t allow short-term market movements to steer you off course.

Suppose, for example, that you have many years before retirement and you have determined that investing in the TSP’s stock funds is appropriate for your time horizon because of the potential for higher long-term returns. If you move your money out of your TSP stock funds when the market starts to dip, you may miss out when it bounces back.

An investment strategy of chasing returns or trying to “time the market” 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.

Source: TSP: Avoid Chasing Returns

  • JimmyD

    You mean it’s not a good idea to sell low and buy high?
    Thanks for the insight.

  • common sense

    There were tons of people who bailed out of the C fund in the last recession, AFTER the market crashed, and they stashed their money in the G fund for safe keeping. And left it there while the market recovered and kept climbing. Never hurts to remind people not to be stupid!

  • Roger Doger

    The DOW and S&P only dropped a little over 3%. Hardly a crash.

  • postalnews

    No, but if you have say, $200K in the C fund, a 3.6% drop cost you $7,200 in one day. That’s enough for some people to panic, and then miss the rebound.

  • Roger Doger

    It’s all “noise”.

    The AM news reports were that the DOW was expected to open down 500 points. The S&P 3%. Why was it worded like that? Because 3% of the S&P is only ~70 points at current level. 500 points is ~3% of the DOW at current level. But it is so much more dramatic to say 500 points vs. 3%.

    I see this like tabletman posted above, this is a buying opportunity.

  • IIlIIl111

    ” Never hurts to remind people not to be stupid!”…….They should have done alittle more of that over in Britain. I hope the idiots will enjoy working another 5 -10 years until they can afford to retire………………

  • postalnews

    “Points” are irrelevant. The number to look at is the percentage up or down. 3.6% doesn’t sound like a big number, but if it means your retirement nest egg has lost $7,200, then it does get your attention.

    If you base your investment strategy on “AM news reports” you probably shouldn’t be managing anyone’s investments, including your own.

    If, on the other hand, you actually DO have a proven winning strategy for playing the market, why are you wasting your time talking about TSP? Surely you’re a billionaire by now?

  • common sense

    I feel bad for all the young people who grew up with open borders, and the idea that they could go anywhere in Europe to work, study, or just travel. All gone now (or at least soon), all because of their parents’ and grand parents’ paranoia and prejudices.

  • Roger Doger

    Postalnews, my good man, no need to get snarky with your response.

    “Points” are irrelevant? If there was an individual stock called the DJIA, each “point” raised or lowered would be $1.

    Let’s take for example the Vanguard S&P 500 mutual fund, VFINX. It tracks the S&P 500 that is reported in the news.

    It closed on 6-24-2016 at 187.93. That means 1 share cost $187.93 for those playing along at home. It was down 7.01 “points”, or $7.01 from the close on 6-23-2016. Which equals a 3.60% drop.

    Disney (DIS) closed at 95.72 ($95.72) Down 3.30 points ($3.30) or a 3.33% drop.

    Quoting from YAHOO Finance, the S&P (^GSPC) closed on 6-24-2016 at 2037.41. Down 75.91 “points” or dollars. Or a 3.59% drop.

    IF by your example a 3.6% drop that equals a $7200 lose “gets your attention, you probably don’t need to be investing in the stock market.

    Now, my vanguard account had a balance on 6/24/2016 of $172,828.23. Down $551.81 from $177,380.04 on 6/23/2016. Or 2.6%

    Yes, I “may” base my investment strategies on the AM, or PM, news reports. Based on the “fear” of the market dropping, I may see a good buying opportunity.

    As for me being a billionaire by now? No, Unfortunately I will not make it to being a Millionaire by the time I retire. But, my projection is to be breaking the $750,000 mark by my retirement at 57. Not to bad for someone that never made more than $60K/year. And didn’t make more than $30K until after age 30.

    Please excuse me while I log into my TSP and Vanguard account and shuffle some money from my G funds/money market funds to the stock market funds. This looks like a good buying opportunity. Not an “all in” situation. But an opportunity to get buy on a dip.

    😉

  • postalnews

    Apologies if I came across as snarky. The “point” I was making was that you need to compare apples with apples. How many points the S&P is up or down doesn’t really interest me- just the percentage return.

    As far as your comment “IF by your example a 3.6% drop that equals a $7200 lose [sic] gets your attention, you probably don’t need to be investing in the stock market.”, aren’t you contradicting yourself? You say the drop is “an opportunity to get buy on a dip”- apparently it “got your attention”, didn’t it?

    Good luck with your “strategy” hopefully the processing lag and the two transactions per month limit don’t get in the way!

  • Roger Doger

    I’m sorry, you were not trying to “make a point”. You said “points are irrelevant”. A direct quote to your post. As I stated a “point” is the same as saying “$1”.

    I see that this conversation is going to be like a dog chasing his tail. So I will bow out and let you carry on with what ever dribble you chose to type.

    Good day.