In our tactical asset allocation strategies, we dynamically allocate a portion of investable assets to the TSP C Fund, based on the prevailing market conditions.
In addition to owning stock funds, TSP investors should consider bond funds like the TSP F Fund, since the prices of bonds are often uncorrelated or inversely correlated to stocks, providing a welcome buffer during market downturns, and reducing the overall volatility of an investment portfolio. The prices of domestic and international stock markets (and small, mid, and large cap stocks) don't always move in tandem, and by investing in all of them, you reduce your exposure to stock market risk. For a truly diversified global stock portfolio, TSP account holders should consider buying an emerging markets mutual fund such as the Vanguard Emerging Markets Stock Index Fund (VEMAX), which is available through the TSP Mutual Fund Window option.
Owning shares in all three funds results in a more diversified stock portfolio. Investors may also want to consider the TSP I Fund, which tracks an international stock index. stocks, thereby complementing the C Fund and offering investors the opportunity to benefit from this potential excess return. So in addition to owning C Fund shares, investors may also want to consider the TSP S Fund, which holds small and mid-cap U.S. When held for long periods, small and mid-sized company stocks have historically outperformed large capitalization stocks such as those in the C Fund. In the long run, stocks have outpaced many other types of investments, so an allocation to stocks makes sense for investors interested in growth of investment capital. While investing in stocks is risky (and the C Fund is no exception), it also offers the opportunity to gain from the potential growth of the U.S economy and corporate profits, which is eventually reflected in increasing stock prices and dividends. And although stocks have historically proved to be a good hedge against inflation, there's no guarantee that an investment in the C Fund will grow enough to offset inflation in the future. Since the C Fund is passively managed, it remains fully invested during all market cycles and economic conditions. Your investment in the TSP C Fund is subject to stock market risk (because the prices of the stocks in the S&P 500 index rise and fall during bull and bear markets). Risks and Potential Rewards of Investing in the C Fund Popular examples include the Vanguard 500 Index Fund (VFINX) and the SPDR S&P 500 ETF (SPY). The S&P 500 index is widely followed, and there are many other mutual funds and ETFs that track it. stock index fund invested in common stocks of the 500 companies in the Standard & Poors 500 (S&P 500) Index.
The worst drawdown since inception was -55.2%: The chart below shows the historical drawdowns for the TSP C Fund. An initial investment of $1,000 on would today be worth $22,647: As of, the fund has a compound annual growth rate of 10.2%, annualized standard deviation of 18.3%, and Sharpe Ratio of 0.39. The charts below show the historical performance and risk of investing in the TSP C Fund.
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