The TSP S fund captures all the rest of the US stocks and this is why I like to call it the non-sp500 index for simplicity. The TSP C fund has around 500 of the largest US companies, hence the name SP500. There is less information on the S fund as a whole, but enough to make some good decisions.įirst, combined the TSP C fund and TSP S fund account for the bulk of US companies listed on US exchanges.
It helps to compare the TSP S fund to the TSP C fund to better understand it so we will discuss the SP500 (TSP C fund) here too. It's outperformance is one of chance having under-performed since 1994 when the index the fund tracks was first designed. The TSP S fund started in 2003 near the bottom of a bear market. This increased volatility of small cap funds (TSP S fund) makes it a better candidate of seasonal strategies because the small caps rise further in the favorable season for equities and decline more during the unfavorable season (summer & fall). The best time to buy the small caps would be near market bottoms and as we approach the top move into large caps which are often the last to fall.
The Small cap funds tend to have larger moves up and down (volatility) than the large cap stocks in the SP500 index but their relative performance over a full market cycle (bull and bear market) are not too different. While this chart ends in 2017, it shows the relative performance of the S and C fund over 23 years was basically a tie. You should also know something about why the small caps perform the way they do as compared to the large cap SP500 fund so you can watch out for special scenarios. By understanding this performance characteristic you can increase your investment returns by leaning on each fund at different times. This also applies to bull and bear markets as well as an annual seasonal pattern. One of the main take-aways I pass on about the TSP S fund is that while it tends to perform about the same as the TSP C fund in the long run, it runs hotter in rallies and dives deeper in corrections. To compare the make-up of the major equity funds by sector weighting please review compare equity funds. Past returns are at their highest near market tops and lowest at market bottoms. Many investors choose funds based on past returns. Higher valuations (not the same as price) mean lower future returns. The SP500 swings in value relative to many measures during market cycles (bull and bear markets).
The future returns of the both the non-sp500 index and the SP500 index depend on its current valuation level. To hold the total US stock market in a diversified allocation, you would need to allocate 4 parts to the TSP C fund and 1 part to the TSP S fund such as or. While the index tracks 6 times as many companies, the market value of these smaller companies combined is only a quarter of the largest 500 companies comprising the SP500 index. This index includes over small and mid-sized 3000 companies. We also think of the "S" as Small, as in the Small Cap stocks. For simplicity, we refer to it as the non-sp500 index. The TSP S fund tracks the performance of all the US stocks not in the SP500 index via an index called the Dow Jones Total US Stock Market Completion Index.