TSP S Fund: Quick Guide
- tress14plaid
- Mar 25
- 3 min read
Updated: Apr 2
The S Fund provides exposure to small and medium-sized U.S. companies not included in the S&P 500 Index by tracking the Dow Jones U.S. Completion Total Stock Market Index. With the highest growth potential and volatility among TSP core funds, it offers diversification benefits when combined with the C Fund for complete U.S. market coverage.
Table of Contents
Introduction
The S Fund (Small Capitalization Stock Index Investment Fund) provides federal employees with exposure to the small and medium-sized companies in the U.S. stock market that are not included in the C Fund. By tracking the Dow Jones U.S. Completion Total Stock Market Index, it invests in over 3,000 companies that represent approximately 20% of the market value of U.S. stocks.
TSP S Fund Key Features
Feature | Description |
Investment Type | Small and mid-cap U.S. stocks tracking the Dow Jones U.S. Completion Total Stock Market Index |
Risk Level | High |
Volatility | High (typically more volatile than the C Fund) |
Inflation Protection | Strong (historically outpaces inflation over long periods) |
Income Generation | Some dividend income plus primary focus on capital appreciation |
Principal Protection | None (Subject to market fluctuations) |
Minimum Investment | None (Can allocate any percentage of TSP balance) |
Management Expense Ratio | 0.058% (2023) - Significantly lower than comparable small-cap index funds |
Historical Performance
Time Period | Average Annual Return |
1-Year (2023) | 17.63% |
3-Year (2021-2023) | 0.25% |
5-Year (2019-2023) | 10.41% |
10-Year (2014-2023) | 9.24% |
Since Inception (2001) | Approximately 8.9% |
Source: TSP Fund Performance
Risk Profile
The S Fund carries several types of risk:
Market risk: Subject to potentially significant stock market fluctuations
Small-cap volatility: Smaller companies typically experience larger price swings
Liquidity risk: Small-cap stocks may be less liquid than large-cap stocks
Business risk: Smaller companies have higher failure rates than established large companies
Cyclical risk: Small-cap stocks often underperform during economic downturns
The S Fund typically experiences more pronounced volatility than the C Fund, with both higher peaks and deeper valleys during market cycles.
Ideal Investor Profile
The S Fund may be appropriate for:
Long-term investors: Those with 10+ years until they need the money
Growth-focused investors: Those prioritizing maximum long-term growth potential
Early-career employees: Federal workers with decades until retirement
High risk tolerance investors: Those comfortable with significant volatility
Portfolio diversifiers: Investors looking to complement large-cap exposure
Advantages and Limitations
Advantages
Growth potential: Historically provides higher long-term returns than large-cap stocks
Diversification benefits: Performance patterns often differ from large-cap stocks
Exposure to innovation: Access to smaller, potentially faster-growing companies
Market completeness: Combined with the C Fund, provides total U.S. stock market coverage
Economic sensitivity: Often outperforms during early stages of economic recovery
Limitations
Higher volatility: Experiences more significant price swings than the C Fund
Business risk: Small companies more likely to fail than established large companies
Limited dividend income: Smaller companies typically pay lower dividends
Cyclical underperformance: May significantly underperform during recessions
Liquidity constraints: Underlying securities may have lower trading volumes
Strategic Considerations
Consider these strategic approaches for incorporating the S Fund in your TSP allocation:
Complementary allocation: Pair with C Fund for complete U.S. market exposure
Strategic overweighting: Allocate more to capture small-cap growth premium
Age-based adjustment: Consider higher allocations when younger, gradually reducing with age
Volatility management: Be prepared for larger swings and avoid emotional reactions
Rebalancing discipline: Regular rebalancing can help capture gains from volatility
For more information about the Dow Jones U.S. Completion Total Stock Market Index, visit S&P Dow Jones Indices.
For TSP allocation tools and resources, visit the TSP website.
This guide is intended for educational purposes only and does not constitute financial, legal, or tax advice. Federal employees should consult with qualified professionals regarding their specific circumstances.
Comments