Rate of return


Q: In the March 7th issue of Federal Times, on Page 20, there appears a TSP SNAPSHOT which has the
following entry:

Individual funds  C Fund
March 3           $16.15
Year-to-date      6.18%
Last 12 months    21.34%

Am I really receiving a 21.34 percent return for funds in the “C Fund” for the last 12 months? I am able to get only 1% to 2% return on a CD for a year. The 21.34 percent just seems too good to be true! Am I misinterpreting what I see?

A: The calculated rate of return was correct. Remember that this rate of return only applies to a specific time period and is not the most likely, or expected, annual rate of return for the C Fund. The difference in rates of return between the C Fund and a one-year CD is largely a reflection of difference in risk between the two. The CD never produces a 50-percent annual loss!


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