The Basic Funds

 

The G Fund

The Government Securities Investment Fund is invested in short-term non-marketable U.S. Treasury securities that are specially issued to the TSP. The G Fund interest rate is a weighted average of market rates of return on outstanding U.S. Treasury securities with 4 or more years to maturity.

 

There is no credit risk (that is, risk of non-payment of principal or interest) for the Treasury securities in the G Fund. In addition, market risk (risk that investments may fluctuate in value as interest rates change) is eliminated by the FRTIB's current policy of investing the G Fund in short-term rather than longer-term securities. However, G Fund rates of return may well be lower than those of the other TSP funds over the long term. See the official G Fund information site and historical return site.

 

The F Fund

The Fixed Income Index Investment Fund is invested in a bond index fund that tracks the Lehman Brothers U.S. Aggregate (LBA) bond index. This index consists primarily of high quality fixed-income securities representing the U.S. Government, mortgage-backed, corporate, and foreign government sectors of the U.S. bond market.

 

The F Fund offers the potential for increased rates of return relative to the G Fund over the long term, especially in periods of generally declining interest rates. At such times, the market value of the bonds held in the F Fund should increase, unlike those of the short-term securities held in the G Fund.

Unlike the G Fund, the F Fund carries credit risk, market risk, and prepayment risk. Thus, the F Fund also has the potential for negative returns, which would result in losses. See the official F Fund information site and historical return site.

 

 

The TSP Stock Funds

The C, S, and I Funds are stock index funds. The advantages of investing in stock index funds are: (1) the potential for the relatively high investment returns that are sometimes available from stocks; (2) diversification among a broad range of stocks, which mitigates the effect on overall returns from the poor performance of an individual security or industry; and (3) relatively low investment management fees and trading costs.

 

The main risk of investing in a stock index fund is that it may experience a sharp decline with unfavorable changes in overall economic conditions. The total return on a stock fund could be negative, resulting in a loss.

 

The C Fund

The Common Stock Index Investment Fund is a large company stock fund. The C Fund tracks the Standard & Poor’s 500 (S&P 500) stock index, which consists of the stocks of 500 companies traded in the U.S. stock markets.

 

The C Fund gives you the opportunity to invest in a diversified portfolio of large U.S. companies. The risk of investing in the C Fund is that the value of stocks can decline sharply, and the total return on the C Fund could be negative, resulting in a loss. See the official C Fund information site and historical return site.

 

The S Fund

The Small Capitalization Stock Index Investment Fund is the TSP’s medium and small company stock fund. The S Fund tracks the Wilshire 4500 stock index, which consists of the stocks of U.S. companies not included in the S&P 500 index.

 

The S Fund gives you the opportunity to further diversify your stock investments. The Wilshire 4500 index is the broadest measure of the U.S. stock markets that excludes the companies in the S&P 500 index. Thus, the S Fund in combination with the C Fund covers virtually the entire U.S. stock market.

Investing in the S Fund includes the additional risk associated with stocks of mid-size and smaller companies, which tend to be more volatile than the stocks of the larger companies in the C Fund’s S&P 500 index. See the official S Fund information site and historical return site.

 

The I Fund

The International Stock Index Investment Fund is the TSP’s foreign company stock fund. The I Fund tracks the EAFE (Europe, Australasia, Far East) stock index, which consists of common stocks of large international companies in 21 countries.

 

The I Fund gives you the opportunity to further diversify your stock investments to include stock markets of developed countries outside the U.S. The additional risk of investing in the I Fund is that I Fund investments include both the increased volatility of foreign markets and the risk of foreign currency fluctuations. See the official I Fund information site and historical return site.

If you choose to invest in the F, C, S, or I Fund, you must acknowledge the risks involved. There is no assurance that future rates of return will replicate the rates shown in previous examples.

The Guide to TSP Investments, available from your personnel office or the TSP Web site, offers more detail about TSP investments.

 

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