June 2022
As I hope all of my readers know, this post is occurring early due to the major changes about to occur with the TSP. The most significant will be the mutual fund window, an option that gives everyone the opportunity to invest in ~5,000 mutual funds. Unfortunately there are additional fees with this service. They are:
- $55 annual fee to ensure that use of the mutual fund window does not indirectly increase TSP administrative expenses for TSP participants who choose not to use the mutual fund window
- $95 annual maintenance fee
- $28.75 per trade fee
- Other fees and expenses specific to chosen mutual funds
There are other restrictions as well that you need to be familiar with. Although this is a significant change to the TSP, we will not be changing our proven methods or models. We will remain with the 5 standard TSP Funds (well, 4 actually, as we will not invest in the G Fund). If you are interested in mutual funds, I would suggest you check out My Funds Coach at www.myfundscoach.com.
This month, or partial month, has seen significant conversations about the market being a Bear Market and the US being in a recession. Both of these metrics are lagging indicators, and as I mentioned last month, by the time a recession is declared, you are already probably on the way out. We have not had one declared yet, so we are still probably on the way down. The same is true for a Bear Market, defined as a decline of 20% over a period of a few months. We are at -16.81% for the C Fund YTD, so while not a Bear Market, the pain is still there. I think the counter to this current Bear Market is the inflationary pressures driving investors to still view stocks as more attractive than bonds.
I am pretty Bearish on the market, and I'm pretty sour on the economy and inflation, but I don't believe I have any other good options at this point with the Federal Reserve having kept interest rates so low for so long. We should be seeing the F Fund with at least 8-10% annualized with our current inflation numbers.
Until the Fed raises rates even more, stocks will remain as a viable option, especially when some stocks are trading at a discount. Short-term, I think we will continue to see some very rough days. Longer-term (6-9 months) I think we will see a recovery that will outpace the F Fund. This is important to note. Switching to the F Fund (or the G Fund) would prevent participation in any of the C Fund recovery. I am going to ride out the lows, keep investing, and even increase my investment percentage during this period, and benefit from lower prices while I can.
Keep investing!
