The 'right time' to invest ...
Columnist Mike Causey speculates on how the late great comedian Groucho Marx would invest for the 21st century—but quickly gets serious, sharing with us the fund picks of today's, and tomorrow's, TSP millionaires.
Like many first-generation comedians of the last century, Groucho Marx was very smart. Not well-educated, but smart. Well-read. A lot of the funny things he said were also pretty deep. He was once quoted as saying he wouldn’t want to belong to any club that would have him as a member! As a devotee of The Marx Brothers, I would note Groucho said that BEFORE Congress set up credit unions and 401k-style self-investment and savings plans. Like the federal-military Thrift Savings Plan.
If you are one of the 6 million current, former or retired feds counting on the TSP to make your Golden Years a 24-carat time … well, this one's for you. People with TSP accounts have wide-ranging, often fascinating, and sometimes life-or-death jobs. They include CIA agents and FBI profilers; Navy SEALS and Army Rangers, generals, admirals and highly-skilled enlisted personnel; park rangers, IRS auditors, NASA astronauts and—probably too—your Senator, Congressperson and very likely indeed POTUSes past and present. An impressive lineup of people with important and critical jobs.
Some of the most successful TSP investors were rich before they even thought about a career in government. Like many very successful lawyers who joined Uncle Sam later in life as federal judges for life, or elected or appointed politicians and Cabinet officers. So, between this group of richer appointees and the majority did-it-myself TSP investors, you wind up with a much more impressive and broad-based group in the TSP than at just about any Credit Union or company 401k. Bottom line: the TSP is a VERY BIG deal.
If I can digress for a second, I have a friend/source who is a well-known financial planner and writer for financial magazines. He's not just well-known, he's very good. He claims that his first words in life were “Past performance is no guarantee of future performance.” Pretty sure he was kidding here, but I get his point. All the experts—true experts, not gamblers or gurus—share that catchphrase. It covers them, and it is also true.
But you also know that—if you look at the market’s good years and the bad ones, over time—the upward trajectory, so far, has been upward. Most people who made money in the market are long-haul investors. They do not abandon the market when it switches from Bull to Bear mode. Sure, they know the smart thing is to buy low, then sell high. But also that almost nobody can do that with any steady accuracy over time! So, the winners—marathoners rather than sprinters—stay put in the market when times are bad (and stocks are bad, but on sale) rather than retreating and wait for the “right time” to buy.
Hundreds of thousands of investors panicked when the Great Recession hit in 2008. After years of mostly prosperity, the bottom fell out. Many thought it would become like the Great Depression that dragged on for more than a decade, beginning in 1929. At any rate, after 2008 many left the stock-indexed C, S and I funds in the TSP and moved into what they saw as the “safety” of the treasury Securities G-fund. But in moving into the G-fund, many investors stopped buying the C, S and I funds. Though those indeed had fallen in price, with the hindsight of history we see they were actually just on sale, not in semi-permanent doldrums. In fact, by moving to “safety,” many feds lost money. Unlike the Great Depression, the Great Recession ended pretty quickly. In the years afterward, despite the usual ups and downs and corrections, the markets mostly went up. So, feds who quickly got back to buying stock-indexed funds saw their balances rise. But many other feds, to this day, remain, wholly or nearly so, in the G-fund. Still waiting for the “right time” to buy. These folks missed—at least to date—a huge upturn of the stock market. Feds and other investors who stay the course, historically at least, have prospered.
Still, at the moment admittedly there is “bad” news. From Dec. 31, 2021 until March 31 of this year, the account balances of most investors dropped. The number of TSP millionaires fell from 112,880 in December 2022 to 100,364. Remember, most of these TSP millionaires are self-made. They invested an average of 29 years and have most or all of their accounts in the higher-risk, higher-reward stock funds—C, S and I. Amazingly, some TSP investors have $3 million in their accounts. An illustration—or at least a snapshot—of our mostly upwardly-mobile stock market is if you compare today’s numbers, over 100,000 TSP millionaires, with those of just a couple years ago, December 31, 2020. Back then, there were “only” 75,420 TSP millionaires! Only!
Finally, while the media loves to focus on self-made millionaires—a million is still a powerful number—the real story is the far larger number of feds who have risen to the $500,000-plus group. So, keep a close watch in coming years, because an increasing number of those are—likely—poised to move into the TSP Millionaires Club …