It’s Not a Bird or a Plane: It’s The S Fund!

Look! Up in the sky!

We all remember that catchy 60’s theme song…

Faster than a speeding bullet.

More powerful than a locomotive.

Able to leap tall buildings in a single bound.

The Superman Fund

If they were to print T-shirts for each of the TSP funds, the S Fund would have a big ol’ Superman “S” on the front, complete with a cape attached.

The S Fund is typically known as the TSP’s most aggressive growth fund. It got its name from covering small-cap arena funds, mirroring the Dow Jones U.S. Completion Total Stock Market Index.

The S Fund’s Kryptonite

If the similarities to the Man of Steel go on: bear markets are the S Fund’s kryptonite. In bull markets, small-cap stocks soar.

Small-cap stocks are historically more volatile than large-cap funds, and if there’s any type of market correction you’ll likely feel it with the S Fund.

In 2008 the S Fund declined more than 38%, but in 2009 it rose almost 35%.

Like Lois Lane, S Fund investors must understand that Superman will not always be able to perform great feats. The ability to wait through a down market is essential if you want to invest in the S Fund.

Many Faces

Speaking of Superman, how many actors have we gone through over the years?

The problem with having so many different people portray Superman is that we aren’t sure who he really is. The same could be said with the S Fund.

The stock index that the S Fund mirrors contains over 4,500 companies.

Its top holding, American Airlines, makes up less than 1% of the index. Other top holdings include a biotech company, an auto manufacturer, a casino company, and online companies LinkedIn and Twitter, each making up only a minuscule percentage of the total.

While the S Fund itself has a lot of diverse holdings, like Superman, it still needs a team of other heroes to save the day.

Superhero Movies and Investing

One of the key differences between a successful superhero movie and a successful investment portfolio is the number of actors in your cast.

A superhero movie needs one charismatic action star, while an investment portfolio needs diversification (among other things) to put on a great production.

Saving for retirement isn’t about investing in just one superhero. It’s about investing in all the members of the Justice League.

You need Batman, Wonder Woman, The Flash, Green Lantern, and Aquaman (and all those other guys too), otherwise Clark Kent’s cape is going to get pretty muddy fighting all those bad guys by himself.

Proper diversification of your TSP portfolio attempts to do the same by balancing growth against volatility, especially as you get closer to retirement. If you rely on just one fund to fight your battles, the bad guys just might win.

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For over 30 years, federal employee retirement planning has been a key focus of Medallion Financial Group. We recognize that FERS retirement benefits have extra layers of complexity, such as the Thrift Savings Plan (TSP), 401K, Pension plan, FEGLI and more. It’s easy to get lost in a sea of bad advice when so few people understand the basics. We help with the basics and beyond to enable our clients to get the education and advice they need to retire with confidence.

Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.

We strive to exceed client’s expectations – because we have high expectations of ourselves.