TSP Folio Strategy Performance (as of 3/29/2017)

The chart below compares the performance of the TSP Folio investment strategy to a “buy and hold” portfolio consisting of 40% stocks and 60% bonds [2]. The TSP Folio strategy has been consistently profitable, with a compound annual growth rate (CAGR) of 10.1%. An initial investment of $1,000 in 1990 would be worth $12,818 today [1].

Strategy: TSP Folio 40/60 Benchmark [2]
Compound Annual Growth Rate [1] 10.1% 7.4%
Standard Deviation [3] 6.4% 6.2%
Maximum Drawdown [5] -10.2% -23.2%
Sharpe Ratio [4] 0.82 0.44
Growth of $1,000 invested in 1990 $12,818 $6,629

By comparison, the benchmark portfolio has a CAGR of 7.4%, annualized standard deviation of 6.2%, and Sharpe Ratio of 0.44. Note that the benchmark drawdowns (-23.2%) are significantly worse than the strategy drawdowns (-10.2%). The TSP Folio strategy also has superior absolute and risk-adjusted returns compared to any of the individual TSP funds, including the Lifecycle funds.

Annual Performance

Year TSP Folio Strategy 40/60 Benchmark
1991 17.88% 18.39%
1992 6.89% 4.74%
1993 14.00% 14.98%
1994 5.92% -0.41%
1995 26.37% 20.74%
1996 13.37% 8.37%
1997 20.80% 13.01%
1998 8.39% 15.16%
1999 17.29% 9.53%
2000 4.61% 2.17%
2001 8.48% -1.55%
2002 5.35% -1.40%
2003 19.55% 15.87%
2004 9.13% 8.75%
2005 5.63% 5.16%
2006 15.22% 11.07%
2007 7.60% 7.65%
2008 2.64% -12.61%
2009 10.74% 14.94%
2010 11.25% 8.63%
2011 2.63% 2.79%
2012 6.49% 9.52%
2013 15.50% 9.91%
2014 8.75% 5.74%
2015 -6.93% 0.74%
2016 5.75% 4.57%
2017 3.55% 3.35%

Monthly Strategy Performance

Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Year
1990 0.9 1.2 2.2 1.6 5.96%
1991 1.8 2.5 1.5 0.9 1.7 -2.7 2.8 2.6 1.0 1.7 -0.7 3.8 17.88%
1992 1.0 1.0 -1.9 -0.5 1.4 -0.6 2.5 0.4 1.2 -1.1 1.6 1.8 6.89%
1993 1.8 0.3 1.1 0.8 1.9 -0.5 1.5 3.9 -0.0 1.8 -2.9 3.7 14.00%
1994 4.2 -0.2 -2.0 2.2 0.1 0.1 1.5 1.9 -1.4 1.3 -2.3 0.5 5.92%
1995 2.3 3.2 1.9 1.9 2.5 1.8 2.9 0.9 2.3 -0.6 3.1 1.4 26.37%
1996 1.9 0.9 1.0 2.2 1.4 -1.1 -3.0 0.4 3.4 1.7 4.9 -0.9 13.37%
1997 3.5 0.3 -2.1 2.9 3.8 2.9 4.3 -1.4 4.5 -1.9 1.5 1.2 20.80%
1998 1.0 1.8 3.0 0.9 -1.4 2.1 -0.7 -4.1 3.5 -0.5 1.0 1.8 8.39%
1999 1.8 -2.0 1.8 2.2 -1.2 3.2 -1.5 0.1 0.2 2.6 2.5 6.6 17.29%
2000 -2.6 6.0 -0.8 -3.9 -0.8 2.4 0.5 1.7 -1.0 -0.1 1.6 1.9 4.61%
2001 1.6 0.9 0.5 -0.4 0.6 0.3 1.8 1.2 1.2 2.1 -1.4 -0.2 8.48%
2002 0.2 0.4 -1.1 -0.0 0.7 -0.1 0.9 1.7 1.5 -0.4 -0.0 1.4 5.35%
2003 0.3 1.4 -0.1 0.9 2.6 0.7 1.8 2.2 -0.2 4.0 1.8 2.5 19.55%
2004 1.2 1.4 0.4 -2.3 0.4 1.7 -2.4 1.8 0.6 1.4 2.3 2.5 9.13%
2005 -1.2 2.1 -1.3 -1.3 0.6 1.3 2.3 -0.3 1.0 -1.4 2.1 1.6 5.63%
2006 3.4 -0.1 2.0 2.2 -2.3 0.3 0.7 1.9 0.6 2.3 2.0 1.4 15.22%
2007 0.9 -0.1 1.3 2.3 1.9 -0.2 -1.4 0.6 1.9 1.8 -1.0 -0.3 7.60%
2008 1.0 0.2 0.3 -0.1 -0.6 -1.3 0.1 0.7 -1.7 0.5 0.3 3.3 2.64%
2009 -1.0 -0.2 1.1 0.6 1.0 0.2 2.9 1.4 2.5 -1.4 2.0 1.2 10.74%
2010 -1.7 2.3 3.8 2.3 -3.9 -0.2 1.0 1.0 0.1 2.2 0.1 4.1 11.25%
2011 1.7 2.2 0.5 2.5 -0.7 -1.0 -0.5 -2.7 -0.0 0.1 0.1 0.5 2.63%
2012 0.7 1.5 1.0 -0.2 -4.3 1.4 1.1 1.1 1.8 -0.5 1.2 1.7 6.49%
2013 2.8 0.2 1.6 1.7 -2.0 -0.7 3.7 -1.3 3.9 2.8 0.9 1.3 15.50%
2014 -1.5 3.5 -0.5 1.2 1.8 1.1 -1.0 2.5 -1.3 1.1 1.5 0.1 8.75%
2015 0.3 -0.2 -0.9 -0.6 0.6 -0.9 0.4 -3.8 -1.3 0.0 -0.3 -0.6 -6.93%
2016 -1.1 0.9 0.9 0.4 0.2 1.1 1.2 0.1 0.3 -1.9 2.4 1.2 5.75%
2017 1.4 2.0 0.1 3.55%

Notes

  1. The TSP Folio strategy was made available to subscribers on 8/30/2010. Performance results before this date represent a hypothetical strategy backtest. Strategy performance is tracked and verified by TimerTrac.com. (Note that Allocations made within the past 3 months are only shown to current subscribers).
  2. The benchmark portfolio is an allocation to 40% stocks and 60% bonds, invested in TSP funds as follows: 20% C Fund, 20% I Fund, and 60% F Fund. We chose this benchmark portfolio because the historical average monthly stock allocation of the TSP Folio strategy is approximately 40%. TSP Folio is a dynamic allocation: the actual monthly exposure to stocks varies between 0% and 60%.
  3. Standard deviation, also known as historical volatility, is used by investors as a gauge of the amount of expected portfolio volatility. Volatile funds or portfolios have a high standard deviation. When comparing investments, a low standard deviation is preferable.
  4. The Sharpe Ratio measures risk-adjusted performance. It's calculated by subtracting the risk-free interest rate from the rate of return for a specific portfolio, and dividing the result by the standard deviation of the portfolio returns. We use the TSP G Fund returns as our risk-free investment. When comparing portfolios, a high Sharpe Ratio is preferable.
  5. Drawdown: the peak-to-trough decline in investment or portfolio value, measured as a percentage between the peak and the trough. A good investment strategy aims to minimize drawdowns.
  6. The first TSP fund became available to investors in April 1987, and others followed in 1988 and 2001. TSP.gov has published monthly fund returns since inception, and daily fund price history since 2003. To allow for a longer performance comparison and backtest, we extended the available TSP fund price history with the underlying index data. For example, for the TSP C Fund, we extended the available price history with the S&P 500 Total Return index. The same was done for all other TSP funds and their underlying index. The indexes we use do not account for fund expenses, so earlier returns for both the benchmark portfolio and TSP Folio strategy will be slightly higher. However, in practice the difference is not significant, because the TSP funds have extremely low expense ratios (0.027% per year as of this writing).
  7. An investor following the TSP Folio strategy typically enters the rebalancing orders on the last business day of the month, after the market close, or on the next business day. The impact of this 1 day delay is already incorporated into these performance statistics.

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