TSP share prices

This topic contains 4 replies, has 4 voices, and was last updated by  daniel 3 years, 11 months ago.

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  • #15691

    aoak
    Participant

    What causes TSP share prices to go up and down? I noticed that the L2040 fund share price was worth around $28/share sometime last year and the newly released L2050 fund share price was $14/share. I have read your post regarding how share price affects your rate of return relative to their beginning and ending yearly share price valuations.

    My question is, if I were to theoretically start buying the L2050 fund my money would be buying twice as many shares as it would with buying into the L2040 fund. Having twice as many shares in the L2050 fund does not guarantee that the L2050’s funds valuation is going to be any greater than the L2040 fund because I do not know what their beginning and ending year’s price/share will be, right?

    I have been told by “well seasoned” Federal Employees, that the amount of shares that a person has in their tsp is all that matters? I do not see how this can be true if the value of the shares seems to be most important, although I can see where having a lot of valuable shares is good 🙂 Can you explain why this is true, partially true or not true at all?

    Thanks!

    #15707

    TS Paul
    Keymaster

    10 shares worth $10 each is the same in value as 1 share worth $100. So if you invest $100, it doesn’t matter how many shares you buy.

    Your return is the difference between how much you invested and how much it is worth when you sell it. So if your investment goes up ten percent, it doesn’t matter if you now have 10 shares worth $11 each, or one share worth $110, your return is the same.

    The TSP Allocation Guide www.TSPallocation.com

    #15719

    rolfeskj
    Participant

    Paul,

    I had a simular question on how the prices are figured on the funds as compaired to their Average Annual Returns. They just dont seem to add up, or even close.

    As an example:

    2040L Fund:
    8/1/05 – $14.03
    2/5/15 – $26.74 (about 14.5 years old)
    2/5/15 – Per TSP Average Annual Return since inception 7.02%

    Acording to the 72 rule, http://www.wikihow.com/Use-the-Rule-of-72#Doubling_Time_Chart_sub, for estimating compound interest doubleing time, an investment should double in 10 years at a average 7% return. The 2040 fund has not doubled yet and its been 14.5 years. Using the same tool a fund would double in 14.4 years at a 5% rate of return. Again they are claiming a 7% average return.

    Doubleing time chart.

    Are my number off, what am I missing?

    #15749

    Daniel Tipton

    My understanding what drives the prices is the change based on what each fund is invested in. It is correct what the % change is, that is what matters, which is what drives the price of the fund.

    100 bucks of S and 100 of C are both worth the same amount, but if they both increase by 2% (.02) won’t the cheaper value actually increase more due to you having more shares of a given fund?

    The S fund is out performing all others based on because it mimics the Wilshire 5000. I really don’t understand why you would completely leave the S-fund unless it is identified the current business cycle is indicating a downward turn (recession).

    This is why I’m split between S and C for the most part. According to this business cycle, the C fund will outperform in the mature phase business cycle. TS Paul is right the S fund will out perform, especially if you look at the past returns.

    I will never have a good of a return as others, but I dunno what the future holds. I stick with the 50/50 split.

    Getting on the topic of share prices, so it does matter in the end, but what the change (growth) is what drives that price. Does the price reflect how many people are invested in that fund?

    When I first joined the govt I put a good # of dollars in the 2050 fund because I thought it’s cheap and does the diversifying for you! I found this webpage though and do a 50/50 split now because what happens when the masses decide to go to a 50/50 split? How will this affect the prices of the given funds? Will everybody stay with the S-fund until jumping to the G and F funds?

    Yea, I write a ton to elaborate on my thought process. Maybe spark some other thoughts by others.

    #15751

    daniel

    https://www.tsp.gov/PDF/formspubs/oc05-16w.pdf
    link didn’t post about compounding calculating returnss

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