TSP activity increases following stock market plunge

Investors in the government's 401(k)-style retirement savings plan showed some signs of shaky nerves after the steep drop in the Dow Jones industrial average Tuesday.

The Thrift Savings Plan Web site experienced increased traffic as participants checked their accounts, and the number of transfers among funds processed Tuesday night reached the fourth-highest level so far this year, said TSP spokesman Tom Trabucco.

The TSP processed 12,627 interfund transfers overnight, Trabucco said. Though that is well short of the highest number of transfers in 2007 -- 16,393 on Jan. 3 -- it is still a "pretty big number," he said, noting that there tend to be more transfers at the beginning of the year, because it is a standard time for participants to reallocate their investments.

Most of the transfers Tuesday night represented movement out of the three basic TSP stock funds and into the less risky G and F funds, which invest in government securities and fixed-income bonds.

Participants took $200 million out of the I Fund, which invests in international stocks. The fund closed at $22.67 Tuesday, down $0.74 from the previous close and up 0.71 percent for the month. Investors took about $109 million out of the C Fund, which tracks the Standard & Poor's 500 Index of stocks in the largest domestic companies. It closed at $15.53 Tuesday, down $0.55 from the day before and 2.51 percent for the month.

They also transferred about $109 million out of the S Fund, which invests in small- and mid-sized companies by tracking the Dow Jones Wilshire 4500 Index. It finished Tuesday at $19.24, down $0.65 from the previous day and 0.57 percent for the month.

Of the total amount moved out of these funds, about $370 million went to the G Fund, which did not change Tuesday and was up 0.34 percent for the month, and about $49 million flowed to the F Fund, which changed very little Tuesday and was up 1.71 percent for the month.

TSP officials, however, recommended against shifting money in response to short-term market fluctuations.

"We always advise participants to have a long-term investment horizon and to stick with that plan over the long term," Trabucco said.

Plan participants who are uncomfortable with the movement in the markets should consider placing their money in the life-cycle (L) funds, which invest in a mix of the basic funds that grows more conservative as employees near retirement age, he said.

Trabucco expects activity to remain elevated Wednesday. He said investors may have trouble logging on to their accounts on the TSP Web site, and if they do, they should try the TSP's toll-free phone number: 877-968-3778.

As of Wednesday afternoon, the markets were rebounding somewhat. The Dow Jones was up about 0.7 percent after a more than 3 percent drop Tuesday, and the S&P 500 was up about 0.8 percent, also on the heels of a more than 3 percent plunge. Tuesday's decline -- the steepest in about four years -- was precipitated by a drop in Chinese stocks.