Ask The Experts: Money Matters

By Mike Miles

S and I funds

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Q. In 2008, when the market crashed, I put a lot of my G and C funds into the S and I. The balance was around $107,000 at the time. It’s now 2013 and my balance today is $270,000 as the share prices for the S and I have more than doubled. The S Fund went from $11 a share to $26 a share. The I Fund went from $12 a share to $25 a share. When is a  good time to move all of the S and I back into the G or C funds so that I do not lose what I have gained over the past five years? My thoughts are to bail out now, place it in either the G or C, but to continue to make biweekly contributions into the C/S/I funds as the years continue. I have 14 years in FERS and have another 15 to go before I retire.

A. First, the C, S and I funds are highly correlated. That is, they move in the same direction at the same time and have similar short-term volatility, so I’m not sure that I see the logic of jumping from S and I to C. Second, if you abandon stocks, when will you buy them back? What if there’s no big market crash in the next few years to give you an obvious opportunity. Don’t make the classic gambler’s mistake of thinking that luck is anything more than that. You can’t expect lightning to keep striking in the same place.

I do agree, however, that as stocks have run up, you should have, and continue to take stock risk out of your portfolio. A smarter way to do this is to pick a moderate to aggressive asset allocation, using all five of the Thrift Savings Plan’s basic funds, and regularly rebalance to that allocation. This will hedge the risk you’re worried about, and the ones you’re not.

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Comments

  1. Pat Mo Says:
    March 17th, 2013 at 2:42 pm

    You are correct about the C fund as that is basically the S&P. S fund is the Dow and I is international so they are as you say correlated. I am betting the reader meant the F fund and not C fund.

  2. Al R Says:
    March 24th, 2013 at 11:43 am

    The S Fund is comprised of SMALL companies (S for Small) and is not similar to the Dow 30. All Dow 30 stocks are in the S&P 500 so the Dow 30 is more closely related to the C Fund not the S Fund.

    If the question writer wishes to ‘take some money off the table’ he could change from a more aggressive asset allocation to a less aggressive asset alloction. For example move from L2050 to L2040, or L2040 to L2030.

  3. USPS Letter Carrier Says:
    April 27th, 2013 at 11:57 pm

    “S fund is the Dow”

    The S Fund is comprised of Small company stocks. The Dow 30 are all Large company stocks and are represented in the C Fund. So the Dow 30 is more akin to the C Fund not the S Fund.