Financial health and drastic economic effects have presented concerns throughout the COVID-19 pandemic. Savings interest rate and retirement investment accounts alike have taken losses. When analyzing your Thrift Savings Program (TSP) account balance, these four tips can help you contextualize and understand some of these changes.
- Declines are not Realized Losses Unless You Sell
With all of the noise surrounding the economy and stock market, you may feel pressure to sell or reallocate your TSP investment funds. This is normal. But it could also be a risky investment move. While your investments may currently be worth less than they once were, those declines are only locked in if you sell.
- Markets Have Historically Bounced Back
Markets go up, markets go down, and there's no way to know when either will occur. In short, past performance is no guarantee of future results. Still, the long-term trend of the stock market has always been positive, given enough time.
- Selling Out Could Mean Missing Out
Search the Internet for "Cost of timing the market" and you will find countless articles illustrating the potential portfolio return damage of missing just a small number of the market's best performance days. Since those days often happen in close proximity to some of the worst performance days, selling to try to miss more down days could cause you to miss big up days too.
- Long Term Equals a Long Time
When investing, experts recommend having a long-term focus measured in years or even decades, not the days, weeks or months on which economic and market headlines tend to focus. While it's probably not wise to ignore the headlines altogether, too much focus on short-term negative news can cause you to take actions that will negatively affect your long-term returns and plans.
For more information on the TSP and how it fits into your retirement plan, speak with a Personal Financial Manager at your installation.