My TSP account value over 15 years

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

My TSP account value over 15 years

Postby baw703916 » Sat Feb 11, 2012 2:37 pm

I think that sometimes people on this board miss the forest for the trees, and more particularly are thinking on the wrong time scale. There are a lot of recent threads about how the Euro might derail the world economy, how there was a lost decade, what the future may hold, etc. Basically, a lot of worrying, living in the moment, and difficulty keeping things in perspective.

I'm going to share my experience investing in the TSP. Granted, the TSP is a very diversified, low cost retirement plan, and many people are stuck with a 401(k) or 403(b) that is much less attractive. Also, most government jobs tend to be fairly secure, which may allow people to take more investment risks. But I don't think that what follows is anomalous, or unrealistic for most people. Below is the value (well, not the actual dollar value) of my TSP account over the past 14+ years. Over that time, I've invested at least enough to get the maximum match, and for roughly the last half of the period, I've put in the maximum I'm allowed.

For perspective, on July 1, 1998, the S&P closed a little above 1146. Now, it's not quite 200 point higher, but down since 2000. Yes, almost all of this period except the first couple years has been in the infamous "lost decade". But, my account value is close to its all-time high, and there have only four six month periods in the past 14 years when it has dropped (counting new contributions). I say this not to brag, but simply to point out that even in times when the market performance isn't that great, continuing to invest, staying the course, not panicking, and of course, minimizing costs really does work!

The following is the value of my TSP account on a logarithmic scale over the past 14+ years. The scale is set so that the value in the middle of 1998 is 1. The logarithmic base is a secret. :wink:

Code: Select all
7/1/1998   1.000
1/1/1999   1.306
7/1/1999   1.450
1/1/2000   1.633
7/1/2000   1.691
1/1/2001   1.743
7/1/2001   1.787
1/1/2002   1.831
7/1/2002   1.847
1/1/2003   1.844
7/1/2003   1.953
1/1/2004   2.120
7/1/2004   2.185
1/1/2005   2.331
7/1/2005   2.369
1/1/2006   2.484
7/1/2006   2.556
1/1/2007   2.645
7/1/2007   2.714
1/1/2008   2.741
7/1/2008   2.721
1/1/2009   2.566
7/1/2009   2.641
1/1/2010   2.768
7/1/2010   2.770
1/1/2011   2.902
7/1/2011   2.954
1/1/2012   2.926
2/7/2012   2.969


The message I'm trying to convey is that there's nothing very special about how I invested in my TSP account. I didn't avoid equity risk, nor did I even attempt to market time. When bad things happened during 2000-02 and also during 2007-09, I didn't do anything at all--I just reminded myself that "the market will fluctuate", kept investing every two weeks with the same allocation, and cheered myself with the thought that I was buying more shares than I could before the price had dropped.

All those of you who are in the accumulation phase, with a reasonably stable income and access to a decent retirement account, can do the same thing I did. Staying the course works. Good luck to everyone in their financial future.

Brad
Most of my posts assume no behavioral errors.
User avatar
baw703916
 
Posts: 5701
Joined: Sun Apr 01, 2007 2:10 pm
Location: Northern Virginia

Re: My TSP account value over 15 years

Postby Muchtolearn » Sat Feb 11, 2012 6:19 pm

OP, this post lacks complete balance and an understanding of what contributes to portfolio growth. You have shown that it more than doubled. How much was your contribution relative to the start? How much did we taxpayers contribute as a match? Maybe the portfolio lost 50%.
Muchtolearn
 
Posts: 1563
Joined: Sun Dec 25, 2011 11:41 am

Re: My TSP account value over 15 years

Postby tfb » Sat Feb 11, 2012 6:36 pm

baw703916 wrote:But, my account value is close to its all-time high, and there have only four six month periods in the past 14 years when it has dropped (counting new contributions).

Beardstown Ladies approved accounting principles?
Harry Sit, taking a break from the forums.
User avatar
tfb
 
Posts: 6687
Joined: Mon Feb 19, 2007 6:46 pm

Re: My TSP account value over 15 years

Postby Muchtolearn » Sat Feb 11, 2012 6:43 pm

tfb wrote:
baw703916 wrote:But, my account value is close to its all-time high, and there have only four six month periods in the past 14 years when it has dropped (counting new contributions).

Beardstown Ladies approved accounting principles?


Exactly.
Muchtolearn
 
Posts: 1563
Joined: Sun Dec 25, 2011 11:41 am

Re: My TSP account value over 15 years

Postby baw703916 » Sat Feb 11, 2012 7:11 pm

Muchtolearn wrote:
tfb wrote:
baw703916 wrote:But, my account value is close to its all-time high, and there have only four six month periods in the past 14 years when it has dropped (counting new contributions).

Beardstown Ladies approved accounting principles?


Exactly.


I think you're both missing the point. The Beardstown Ladies (or at least the article written about them) purported that they were stockpickers extraordinaire, and only when the internal rate of return was correctly calculated did their "performance" fall back to earth. The TSP, by contrast, is pretty much the three fund portfolio: Total Bond Market, S&P 500 and Completion Index (in the right proportions, = TSM), and an EAFE fund (Total international, but w/o EM or Canada). There's also a "special" stable value sort of fund, which I've never used to a significant extent. In the TSP, it's simply not possible to perform significantly better, or worse, than your domestic/international/bond split.

You can't retire on internal rate of return. The actual account value, IMO, is what matters.

For a retirement accounts, the primary things that contribute to the account value at retirement are: 1) how much you contribute (at a minimum, enough to get any match, and if possible, the most you are allowed to), 2) not panicking during bear markets, and 3) keeping costs low.

By the way, I have no idea how the data got interpreted as meaning that the account value "more than doubled'. It's on a logarithmic scale--an increase from 1 to 2 represents a multiplication in value by some factor (3, say--not the real number), and an increase from 2 to 3 would represent an increase by another factor of 3.

Brad
Most of my posts assume no behavioral errors.
User avatar
baw703916
 
Posts: 5701
Joined: Sun Apr 01, 2007 2:10 pm
Location: Northern Virginia

Re: My TSP account value over 15 years

Postby Spades » Sat Feb 11, 2012 7:53 pm

Muchtolearn wrote:OP, this post lacks complete balance and an understanding of what contributes to portfolio growth. You have shown that it more than doubled. How much was your contribution relative to the start? How much did we taxpayers contribute as a match? Maybe the portfolio lost 50%.



Matching goes up to 5% for civilian employees. The military generally doesn't get any, but here's a link showing how a few do.

http://en.wikipedia.org/wiki/Thrift_Savings_Plan
User avatar
Spades
 
Posts: 283
Joined: Fri Apr 22, 2011 4:04 pm

Re: My TSP account value over 15 years

Postby VictoriaF » Sat Feb 11, 2012 9:43 pm

baw703916 wrote:For a retirement accounts, the primary things that contribute to the account value at retirement are: 1) how much you contribute (at a minimum, enough to get any match, and if possible, the most you are allowed to), 2) not panicking during bear markets, and 3) keeping costs low.

Brad


Hi Brad,

I made similar observations about my assets since 2001. "Lost decade" or not, I am better off now than I was then. In 2000-2001 my 401(k) was decimated, because I kept buying my company's stock on its way down, as its price continued to decline. Then I discovered the Vanguard Diehards on the Morningstar, completely revamped my portfolio, and was disciplined since then.

I concur with your three primary factors, to which I would add a "zero" factor of not being in debt and having the delta between the income and expenses that is available for investing.

Victoria
Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
User avatar
VictoriaF
 
Posts: 12371
Joined: Tue Feb 27, 2007 8:27 am
Location: Black Swan Lake

Re: My TSP account value over 15 years

Postby baw703916 » Sat Feb 11, 2012 10:26 pm

VictoriaF wrote:I would add a "zero" factor of not being in debt and having the delta between the income and expenses that is available for investing.

Victoria


Good point, I agree.
Most of my posts assume no behavioral errors.
User avatar
baw703916
 
Posts: 5701
Joined: Sun Apr 01, 2007 2:10 pm
Location: Northern Virginia

Re: My TSP account value over 15 years

Postby Cloud » Sat Feb 11, 2012 11:08 pm

Thanks for trying to share your growth but the balance may have grown based on contributions alone without any real growth involved. Without us knowing the starting balance plus contributions over the past 14 years the data is meaningless.
User avatar
Cloud
 
Posts: 605
Joined: Wed Sep 12, 2007 1:43 pm

Re: My TSP account value over 15 years

Postby MossySF » Sat Feb 11, 2012 11:25 pm

No it's not meaningless. The #1 factor in your net worth is your savings rate! You can save your way into a nice retirement regardless of how poorly the market does.
User avatar
MossySF
 
Posts: 1775
Joined: Thu Apr 19, 2007 10:51 pm

Re: My TSP account value over 15 years

Postby MathWizard » Sat Feb 11, 2012 11:30 pm

I will agree that the data does not necessarily support the OP's conclusion,
but I'm surpised that it any great revelation to this on this board. I suspect
that many have come to the same conclusion.

I do calculate my average rate of return from time to time. The calculation
takes into account the contribution and the time of the contribution.
I started a ROTH in Apr 2000 and contributed almost every year, with contributions
increasing when the max allowable contribution increased.

I find that I had an average rate of return of about 5% over the period of Apr 2000
to now. I attribute some of that to that fact that more shares were bought when
the market was down.

The Dow is about where it was in early 2000, maybe slightly higher. This suggests
a lost decade. However, stocks also deliver dividends, and my contributions would
have bought more during downtimes than uptimes.

My return in my 403b is only a little higher, about 6.3%, but I started contributions
in late '89. The rising stock market gave me a slight boost, but in fact, stocks
kept getting more expensive, as evidenced by the high P/E ratios.

I suspect that the lost decade may be far kinder to early accumulators than
the 90's were.
MathWizard
 
Posts: 1491
Joined: Tue Jul 26, 2011 2:35 pm

Re: My TSP account value over 15 years

Postby NYnative » Sun Feb 12, 2012 2:27 am

So far as the TSP, I can give you a real life example that does not count contributions. I retired in 2003 and no further contributions were made after that event. My split among the funds was and still is 25% G (fixed Income), 25% C (S&P 500), 25% I (International) and 25% S (Small cap). If you need further details on the composition of the funds, go to www.tsp.gov. I have not had anything in the F (bonds) fund for over 20 years.

If we use the value of my account when I retired as 100%, I now have 175% in my TSP account. There is a tool in the TSP that allows you to see your holdings and their value on any day since the TSP was created. I started my 100% 30 days after I retired as I still had money going in for about a month. I was under CSRS so I received no match. Also, I was limited to 5% of pay until the year before I retired when it was raised to 7%. How this all happened is a mystery to me as dividends are automatically reinvested and there is no visibility into the process. The bottom line is that the value of my account has increased 75% in roughly 9 years. That's somewhere around 8% annually. I look at the value less than 4 times a year, so I don't even see the daily/weekly/monthly swings. It did drop in 2008, but, even with the drop did not go below the 2003 value.

If you are a Fed and under FERS, as over 75% of Feds are today, the TSP is an extremely low cost savinsg system that you really need to take advantage of if you ever want to be able to retire.
NYnative
 
Posts: 310
Joined: Thu Mar 01, 2007 11:41 am

Re: My TSP account value over 15 years

Postby staythecourse » Sun Feb 12, 2012 2:39 am

MossySF wrote:No it's not meaningless. The #1 factor in your net worth is your savings rate! You can save your way into a nice retirement regardless of how poorly the market does.


100% agree savings rate along with compounding is what I consider the 2 other "free lunches" in investing outside of diversification. BUT...

The other critiques are spot on when they talk about confusing the issue with ongoing contributions. Otherwise, the data being presented by the OP could be used to prove no need to invest in equities and just invest in 100% bonds and let the ongoing contributions grow your portfolio instead of internal returns from equities.

I appreciate the message of the OP and do agree 100% that one needs to keep long term perspective (if that is your time horizon on your IPS), but that data presented confuses that point.

Good luck.
...we all think we're above average investors just like we all think we're above average dressers... -Jack Bogle
staythecourse
 
Posts: 3071
Joined: Mon Jan 03, 2011 10:40 am

Re: My TSP account value over 15 years

Postby sscritic » Sun Feb 12, 2012 2:52 am

I too appreciate what I think the OP's point is. This is not about XIRR or returns or Beardstown Ladies. For all we know he has had a zero percent return. But so what? His portfolio is growing so that he will have money for retirement. If all of that has come from savings (additions), it still buys just as many groceries as he would get from investment earnings. The grocery store doesn't care how you got your money for retirement, just that you have it.

Just keep contributing a good percentage of your earnings and don't worry about markets going up and down.
sscritic
 
Posts: 21858
Joined: Thu Sep 06, 2007 9:36 am

Re: My TSP account value over 15 years

Postby gkaplan » Sun Feb 12, 2012 9:44 am

I think the point that should be made, and perhaps the OP and several others are making, is that "Stay the course" and "Slow and steady" does work. The OP didn't panic in 2000-2002, nor did the OP panic in 2008. The OP continued to make regular contributions.
Gordon
gkaplan
 
Posts: 5373
Joined: Sat Mar 03, 2007 9:34 pm
Location: Portland, Oregon

Re: My TSP account value over 15 years

Postby baw703916 » Sun Feb 12, 2012 1:38 pm

NYnative wrote:So far as the TSP, I can give you a real life example that does not count contributions.


NYnative,
Thanks for sharing your example. Not only is it easier to calculate the internal rate of return, but the example of how the past 12 years have played out for someone approaching/in retirement makes a nice comparison to my example as an early/mid career person. You have done an admirable job of staying the course and not being flustered by all the financial happenings of the past decade!

This thread was not intended to be specific to the TSP. The same principle applies to any tax advantaged vehicle that is reasonably low cost and has some passive options available.

Brad
Most of my posts assume no behavioral errors.
User avatar
baw703916
 
Posts: 5701
Joined: Sun Apr 01, 2007 2:10 pm
Location: Northern Virginia

Re: My TSP account value over 15 years

Postby dharrythomas » Sun Feb 12, 2012 4:50 pm

If you are diversified across the various stock markets and had a asset allocation that included bonds the last decade while bumpy wasn't the worst of all possible worlds.

The keys are as always:
1. Live below your means
2. Diversify
3. Develop an Asset Allocation
4. Rebalance
5. Control costs (of your investments)
6. Repeat (Stay the course)

It may not work in all circumstances over all time periods, but in the game of financial life it will tilt the odds in your favor.
dharrythomas
 
Posts: 545
Joined: Tue Jun 19, 2007 5:46 pm

What was my return?

Postby baw703916 » Sun Feb 12, 2012 5:39 pm

I'll partially respond to the question of how much of the increase in account value was due to new contributions and how much due to internal return.

First off, I don't really know, and with roughly 400 biweekly contributions over 15 years, along with occasional changes in allocation, I'm not really inclined to enter it into a spreadsheet and hit the XIRR button.

But, the total return of all of the TSP funds since June 1, 2003 can be easily calculated. The "share price" was set to $10.00 for each of the funds on that day, and unlike mutual funds, the change in share price since then reflects total return, with reinvestment of all capital gains and dividends. So, it's very easy to calculate.

The cumulative total returns since 6/1/2003 for each of the funds are:

G Fund (stable value fund with a yield similar to intermediate term Treasuries--VFITX): +38.4%
F Fund (Total Bond Market--equivalent to VBMFX): +54.5%
C Fund (S&P 500, equivalent to VFINX): +66.2%
S Fund (Completion Index, equivalent to VEXMX): +128.0%
I Fund (EAFE Index, equivalent to VDMIX): +90.8%

Since 2003, my AA has varied from time to time, but has always been mostly (>75%) in the three equity funds. Before 2003, it was 100% in the C Fund (the S and I Funds didn't start until mid 2001).

A brief characterization of the logarithmic scale I used in the first post: 1.0 is comparable to an annual contribution, 4.0 is "enough to retire on".

Brad
Most of my posts assume no behavioral errors.
User avatar
baw703916
 
Posts: 5701
Joined: Sun Apr 01, 2007 2:10 pm
Location: Northern Virginia


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: jdasch9, Lafder, Peter Foley, PharmaGuy, shadowman, yuti84 and 58 guests