To make it easier for participants to reallocate their investments as they work toward retirement, the TSP created the L funds, which consist of varying combinations of these five main funds. This fund invests in international stock markets. The risk is still higher than the C fund, but the rate of return is higher. But instead of big companies, it invests in smaller companies that aren't in the S&P 500. This fund invests in the stock market too. The risk is still higher than the F fund, but the rate of return is higher too. If the stock market goes up, you can make money. The stocks are made up of the Standard and Poor's 500 (S&P 500) Index, a mix of stocks of 500 large to medium-sized U.S.

Usually, when stock markets go down, bonds go up in value. Your risk is fairly low, but your rate of return is too. government, mortgage-backed, corporate and foreign government bonds. You won't lose money investing in this fund, but your rate of return is the lowest. This fund invests in government securities and is the safest option. TSP participants can choose to invest their money in five main funds: Younger investors benefit from greater returns early in their career, since their investment growth is compounded over time. This post has been updated since it was first published.Normally, younger investors can make up market losses over time however, older investors don't have that luxury. Under TSP policy, investors may make two unrestricted interfund transfers per month, and any additional transfers may only move money into the government securities fund. The TSP calculates the cash flow among funds only on a monthly basis, however, so the effects of the recent transactions arenРІР‚в„ўt available.Р”Вuring June and July, which also were down months for stocks, investors moved a net $7.7 billion into the government securities and bond funds from the other funds. Historically, during market slides, TSP investors have fled to safety, transferring money out of the stock-oriented funds into the government securities fund and into the bond fund, especially the former.

As of the end of July, about 44 percent of the $288 billion that investors had on account in the TSP was in the most conservative fund, the government securities fund, and another 6 percent was in the mixed bond fund. In addition to the long-term orientation of the program, many TSP investors may sit on the sidelines during a downturn because they already have a fairly conservative investment portfolio. Last week, as the stock markets started a steep slide, the number of requests ranged from about 7,900 last Tuesday to about 25,600 last Friday.Р”В®ven the higher-than-normal level of activity represents only a small fraction of the 4.5 million account holders, who include active federal and postal employees and military personnel, retirees and those who separated before retirement but left their accounts in place.Р”Р„lso, the number of investors taking action would be lower than the number of transactions ordered, since some investors order more than one.

Over those two days, $3.5 billion was transferred among funds. The number Tuesday was almost as high, about 25,900. That activity spiked to nearly 27,600 on Monday, though a Monday typically is a busy day because many investors place orders over the weekend but the orders arenРІР‚в„ўt executed until Monday. Investors may change the allocation of their investments at any time, with few restrictions, and on an average day between 5,000 and 10,000 such РІР‚Сљinterfund transfersРІР‚Сњ are ordered, according to the TSP. In addition, the TSP offers a fund of special government securities, a bond fund that tracks an index of corporate and government bonds, and РІР‚СљlifecycleРІР‚Сњ funds that contain mixes of the core funds that vary according to the projected withdrawal date. The closing price after a positive day for stocks Tuesday was $14.39. The large company stock fund, or C fund, which tracks the S&P 500, had a share price of $15.79 at the close of trading July 29, but as of the close of trading Monday, that price had dropped to $13.69, down about 13 percent in six business days. companies, and a third tracks an index of international stocks. company stocks, another tracks small and medium-sized U.S. Three of the TSPРІР‚в„ўs investment funds reflect major stock market indexes and have suffered drops along with those indexes. We consistently urge participants to develop a long-term strategy and stick with it during short periods of extreme market movement.РІР‚Сњ РІР‚СљThere is a reason why market professionals liken transfers during tumultuous markets to trying to catch a falling knife. РІР‚СљThe TSP is designed as a long-term investment vehicle and all of our educational efforts are intended to reinforce that notion,РІР‚Сњ TSP spokesman Tom Trabucco said in an e-mail.

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