In looking at how the TSPinvestor Plus performs during market transitions, it is interesting to analyze how it did so well during that 18 month period from December 2007 through June 2009, now called the Great Recession – a positive 17% annual return, while the C Fund (-27%), S Fund (-22%) and I Fund (-30%) all lost heavily.
There are several months and periods to mark:
- June 2008 – the Plus changes the allocation to 100% G Fund prior to the stocks dropping about 7-8% during the month – thus not taking big losses. In the previous months, the Plus was heavily invested in the stocks.
- July 2008 – the stock markets rebound for about a 2% gain – and the Plus was 80% back in the stocks to match the 2% gain.
- August 2008 through February 2009 – the Plus moves almost exclusively to the G and F funds as the stock market suffers big losses in 6 of the those 7 months. It avoids large losses.
- March to May 2009 – the stock market rebounds for large gains – and the Plus was back heavily invested in the stocks and realizes the large gains.
Looking at those periods, it is not difficult to see how the TSPinvestor Plus performed so well.
Again, these are simulated returns using the model and historical data. Will it translate to future recession periods? I do believe so, indeed.