International fund outperforms other TSP options for 2006

Of the five basic funds in the Thrift Savings Plan, the one investing in international stocks posted the strongest returns for both last month and the whole of 2006.

The international (I) fund earned 3.11 percent for December, and 26.32 percent for the year. The four remaining basic options in the 401(k)-style federal employee retirement savings plan all had positive but more modest returns for the year.

With the exception of the I Fund, the basic funds performed worse in December than they did the previous month. One even lost money in December.

The second-place showing for both December and all of 2006 went to the C Fund, which tracks the Standard & Poor 500 Index of stocks in large and medium-sized domestic companies. That fund gained 1.42 percent last month and 15.79 percent for the year.

The fund invested in small- and midsized firms (the S Fund) put in a similarly strong performance for the year, growing 15.30 percent. But it lagged last month, with returns of 0.11 percent.

The G Fund, made up of government securities, earned 0.34 percent in December and 4.93 percent for 2006.

At the bottom of the pack, the F Fund invested in fixed-income bonds lost 0.54 percent last month. Its yearlong gains were still positive, however, at 4.40 percent.

The TSP's five life-cycle (L) funds, which invest in a blend of the basic funds that grows more conservative as employees near retirement age, performed well for the month and year. Those designed for younger employees with far-off retirement dates posted the largest gains, with increases getting progressively smaller the closer the target retirement date.

The L2040 fund for workers anticipating retirement in 2040 earned 1.31 percent in December and 16.53 percent for 2006. The L2030 increased 1.18 percent last month, and 15 percent for the year; the L2020, 1.17 percent and 13.72 percent; the L2010, 0.90 percent and 11.09 percent; and the L Income, for employees planning to retire in the near future, 0.63 percent and 7.59 percent.

In a recently completed survey, TSP participants signaled support for making the L funds the default option for investors who don't specify how they'd like their money allocated. A switch from the G Fund, which is the current default, to the L funds would require legislation.