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DO DILIGENCE
QU I E T FOU N DAT I O N HELPS P ROACT IV E INV ESTO RS U NDERSTAND T HEI R PORTFOLI OS
CSI: Investigating Thrift Savings Plans By James Blakeway
t’s 1987. Ronald Reagan is serving his second term as president, Paul Simon’s Graceland wins the Grammy for album of the year and the U.S. stock market witnesses Black Monday, the worst day in U.S. market history. While most of the financial industry remembers 1987 because of Black Monday, the year also saw the creation of the Thrift Savings Plan (TSP), the government’s version of a 401(k). At the end of 2018, 5.5 million current and former public sector
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employees had TSP accounts totaling $559 billion in assets. The 401(k) plans, which vary dramatically depending upon the employer as well as the plan provider, tend to offer a plethora of mutual funds to account holders. TSPs, on the other hand, are straightforward when it comes to fund choices. While this could come across as limited choice, the funds provide broad and varied access to the debt and equity markets. TSP participants have three core choices for stock-based funds:
the C, S, and I funds. All three are invested to track stock indexes. The C Fund seeks to track the S&P 500 Index, 500 of the largest U.S. public companies. The S Fund’s objective is to track the Dow Jones U.S. Completion Total Stock Market Index, a broader stock market index of 4,500 companies. Lastly, the I Fund is invested to provide TSP participants exposure to the MSCI EAFA (Europe, Australasia, Far East) Index. The I Fund’s goal is to provide a global, non-U.S. equity choice.
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Spot the average This table lists the average correlation of each ETF to its corresponding TSP fund, as well as the beta values. Data as of Oct. 28, 2019
ETF Name
TSP Price ETF Price
Beta of ETF to TSP Fund
Shares of ETF per 100 Shares of TSP Fund (Unadjusted)
Shares of ETF per 100 Shares of TSP Fund (Adjusted for Beta)
AGG
iShares Core U.S. Aggregate Bond ETF
19.58
112.38
0.878
17.43
19.86
S&P 500 Index
SPY
SPDR S&P 500 ETF Trust
44.29
303.3
1.002
14.6
14.58
S Fund
Dow Jones U.S. Completion Total Stock Market Index
IWV
iShares Russell 3000 Index ETF
53.02
177.7
0.863
29.84
34.56
I Fund
MSCI EAFE (Europe, EFA Australasia, Far East) Index
iShares MSCI EAFE ETF
31.17
67.32
0.991
46.31
46.74
TSP Fund
TSP Tracks
F Fund
Bloomberg Barclays U.S. Aggregate Bond Index
C Fund
ETF Ticker
Past performance is no guarantee of future results. Information provided in an EPI Report does not consider the specific profile, objectives or circumstances of any particular investor or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her investment professional. Investment suitability must be independently determined for each individual investor. QF does not make suitability determinations or investment recommendations for investors. EPI utilizes the S&P 500 as its benchmark given that the S&P 500 is considered a barometer of stock performance in the United States. Aspects of the analysis and information found in an EPI Report are based upon simulated and/or hypothetical performance. Simulated and hypothetical performance have inherent limitations and do not represent the actual performance results of any particular investment products. The EPI Report does not guarantee any results or outcomes in the financial markets. Investors should be aware of the methodology used to produce an EPI Report and the inherent limitations when placing reliance on the results. For additional information about EPI Reports, visit the QF website: quietfoundation.com. TSP fund data from tsp.gov.
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