Detailed Breakdown of the Thrift Saving Plan’s C Fund

The Thrift Savings Plan has 5 different funds. Here is a breakdown of the C Fund, the backbown of most TSP accounts. 

As you may know the Thrift Savings Plan consists of 5 different funds and a host of Lifecycle funds that on can allocate your hard-earned money into. This post, however, will focus on C Fund, the back bone of most TSP accounts.

What is the C Fund?

The C fund is a collective of stocks designed to match the performance of the S&P 500. The S&P 500 index follows 500 largest companies by market capitalization in the United States. If you want to learn more on how to understand the S&P 500, I wrote a post on how to read S&P 500 charts.

How does the C Fund Earn Money?

The C fund earns money in two ways: Rise in stock price and dividend payments.

As you know, with any stock a realized gain in stock price means more money in your pocket. This means that shares of a company that you own are now worth more due to healthy business practices. Shares in a C fund are affected the same way. Companies that are held inside the fund share prices go up, so does the shares within the C Fund.

Dividend payments are pretty tricky inside the C Fund. In normal cases, if you own a stock that pays a dividend, that cash payout is sent directly to your brokerage account, mail, or automatically reinvested back into the company.

In the C fund, however, dividends that are paid out are sent back to the fund. The cash payouts increase the value of the fund and, in turn, raise the share price in the fund.

What are the Risks of Owning Shares in the C Fund?

Just like there are two ways to make money in the C Fund, there are two ways to lose money.

The first way is if the companies in the S&P 500 share prices falls due to poor economic conditions or business malpractice. This will negatively impact the share price of the C Fund.

Secondly, the C fund share price will fall if companies stop paying a dividend.

Because you are allocating money to a fund that is not managed by you, you do not have the freedom to buy and sell individual companies that make up the C Fund.

What Companies Make Up the C Fund?

Here is a list of the C Fund’s top ten holdings (as of Dec 2016):

1.       Apple

2.       Microsoft

3.       Exxon Mobil

4.       Johnson and Johnson

5.       Berkshire Hathaway Inc. Class B

6.       JP Morgan & Chase

7.       Amazon

8.       General Electric

9.       Facebook

10.   At&T

The following is how the C Fund is allocating among the major industry groups:

-          Information Technology 20.8%

-          Financials 14.8%

-          Healthcare 13.6%

-          Consumer Discretionary 12%

-          Industrials 10.3%

-          Consumer Staples 9.4%

-          Energy 7.6%

-          Real Estate 2.9%

-          Utilities 3.2%

-          Materials 2.8%

-          Telecom Services 2.7 %

As you can see the C fund invests in a wide variety of companies and industries. This provides every TSP C Fund investor the benefit of diversification. A properly diversified investor mitigates the risk of one bad company or industry of destroying an investment portfolio.

Going forward…

The TSP has many funds to choose from. The C Fund, especially during a bull run like the current time period can be very profitable if your money is allocated correctly. If you have any questions, please like my Facebook page. I will respond to your inquiries about the TSP or any other personal finance questions you may have.