If you are one of the 6 million active, retired and former feds with a TSP account you may have concluded that the good old days — a 20% growth in the stock market — may be in the rear view mirror. In other words, the long-anticipated “correction” may be upon us. Maybe has already started. As in get out your Great Recession mindset and wardrobe!
In recent days the market has plunged as much as 1,000 points daily, then recovered at close of day with a slight gain. Short of giving TV analysts something to talk about and investors things to think about, it is hard to know when the next major correction — a 20-30% dip — will hit. And how long it will last. And what you should do. If anything.
The standard advice, which your 11-year old probably knows, is buy low and sell high. And that makes sense.
Less clear, as in a lot less, is when to act, if at all? Remember, millions of TSP investors sold stock funds during the Great Recession and put their money in the ‘safe’ harbor of the TSP’s treasury securities G-fund. Millions also shifted their biweekly buying target to the G-fund. The idea was to protect their retirement nest egg from further erosion until the market recovered. (And the price tag for C, S and I fund shares rose). Good move or not? While it may have allowed them to sleep soundly at night, they may have missed the biggest, longest stock market comeback in history. The number of TSP millionaires keeps going up. So did they do the right thing back then.?
And what now with the serious (potentially catastrophic) Russian military buildup on Ukraine’s border? And if that were solved tomorrow (and it probably won’t be) what next? What’s the difference between relaxing, not panicking, and sleeping at the wheel? What do they do between now and when they plan to retire and, more importantly, when they actually start tapping their TSP accounts?
Arthur Stein, a Bethesda-based financial planner(Art@ArthurSteinFinancial.com) with lots of fed-retiree clients, has some thoughts on what’s going on. He said “There is a reason the Boy Scouts’ motto, Be Prepared, has been around so long.” Many of his clients are current/former feds. I’ve spoken or heard from several independently who are TSP millionaires. When I asked him if people are panicking over the stock market he said: “So far, none of my investment clients has called. I have worked with clients to prepare for stock market declines by:
- Educating them to understand that major stock market declines are always in our future. They are part of the stock market cycle. Knowing that declines will occur makes it easier to accept.
- Helping retired clients make sure that they have sufficient emergency funds for any investment withdrawals needed during a market decline.”
Nearly Useless Factoid
By David Thornton
In 2012, Boeing used sacks of potatoes as stand-ins for passengers in order to test and improve in-flight Wi-Fi service. The potatoes’ water content and chemistry cause them to interact with radio signals similarly to human bodies. The project was called Synthetic Personnel Using Dialectic Substitution, or SPUDS.