Which TSP Funds Hold Up Best in a Market Crash?

When markets tumble, your TSP funds don’t all react the same way.

Some provide shelter. Others take heavier hits. A few are designed to balance both.

Understanding how each fund responds in a crisis isn’t just academic — it’s practical knowledge that can help you make smarter decisions about your retirement strategy.

Here’s what that looks like:

G Fund: Safety Net

The G Fund is the most stable investment in the Thrift Savings Plan.

It’s backed by the U.S. government and guaranteed not to lose value, regardless of what the stock or bond markets do.

In 2008 — when global markets were in free fall — the G Fund still posted a +3.75% return. For federal employees close to retirement or those already drawing from their TSP, that kind of consistency offers peace of mind.

But there’s a trade-off: low growth.

Over long periods, G Fund returns often lag inflation. That means your purchasing power could decline if you rely too heavily on it for long-term growth.

F Fund: Bonds with Limits

The F Fund invests in a broad mix of U.S. investment-grade bonds.

During equity downturns, it can act as a buffer. In 2008, while stocks collapsed, the F Fund actually gained +5.45%.

However, bonds are not immune to risk. When interest rates rise, bond prices tend to fall — something many investors were reminded of in 2022.

So while the F Fund can soften the blow during market crashes, it’s not a fail-safe.

C, S, and I Funds: Growth Engines

These three funds represent the stock market portion of your TSP, and they’re where long-term growth typically comes from.

• C Fund (Large U.S. Companies): Fell -36.99% in 2008, then bounced back +26.68% in 2009.

• S Fund (Small & Mid U.S. Companies): Dropped -38.32%, but soared +34.85% the following year.

• I Fund (International Stocks): Lost -42.43% in 2008 and tends to be more volatile, but it adds global diversification to your portfolio.

These funds are more volatile, especially in short-term crises.

But they have historically delivered higher long-term returns — crucial for keeping up with inflation and growing your retirement nest egg over decades.

L Funds: Built-In Diversification

Lifecycle (L) Funds combine all five core funds based on your target retirement date.

They automatically adjust over time, reducing stock exposure and increasing holdings in G and F as you approach retirement.

In times of market stress, L Funds don’t eliminate losses. But they help manage risk through diversification. They’re ideal for TSP participants who want a hands-off, long-term strategy that aligns with their timeline.

The Takeaway

• G and F Funds offer short-term stability and protection.

• C, S, and I Funds fuel long-term growth.

• L Funds automate the balance, adjusting as your retirement date nears.

There’s no one-size-fits-all solution. Each fund has strengths and limits. The right mix depends on when you’ll need the money, not the latest market headlines.

👉 Tomorrow: The emotional reactions that quietly destroy retirements and how to avoid them.

Best,
—FWR