What is dwcpf and how it it measured?

[n.shift]

When the Dow, s and p 500 and so looks positive but the dwcpf is down, one can't help but ask the questions: what is it? How is it measured? What seems to effect it in a positive way and negative way?

[galveston1]

When the Dow, s and p 500 and so looks positive but the dwcpf is down, one can't help but ask the questions: what is it? How is it measured? What seems to effect it in a positive way and negative way?

https://www.djindexes.com/mdsidx/downlo ... _Sheet.pdf

[Aitrus]

n.shift,

I had the same questions when I first started investing too. Maybe a little terminology will help you understand what is going on.

Stock: Companies sell pieces of it's ownership in order to generate money for operations. Each piece is called a "Share". Some big companies have sold millions of shares to stockholders.

Shareholder: An owner of a share of a company's stock. Owning a stock means that you are, in part, one of many owners of a company. When the value of a company goes up, the value of each share of stock goes up, so the shareholder makes money because the total value of his stocks goes up.

Dividend: In order to entice people to buy shares (and thus give the company money to use for operations), the company pays shareholders a dividend on stock that they own. A company might pay a 0.5% dividend quarterly, meaning that they pay 0.5% of the value of a share each quarter to each owner of that stock. If an owner has 100 shares of stock in TSP Company, and each share is worth $10 at the time dividends are paid out, then the owner's holdings in that company are worth $1,000. When the company pays the 0.5% per share, it will pay that owner $0.05 per share, or $5 for the whole 100 shares. The owner keeps his shares, plus the dividend. He can choose to reinvest the money to buy more shares, or keep it (and pay taxes in doing so). Because the company paid out a dividend, the value of each individual share might go up on the market because traders like that the company made enough money to be able to pay a dividend. Some companies have paid dividends each quarter for 40 or 50 years without missing a beat.

Stock Split: As companies do well, their stock goes up because the value of their shares goes up based on the company's success. Eventually, a share of stock becomes too expensive to easily trade on the market. When this happens, the company will split shares of stock, and ensure that shareholders have the same equivalent value after the split as before. For example, let's use the above shareholder's 100 shares in TSP Company as an example. Let's say that the value of a share of TSP Company has risen to $100 per share. TSP Company may issue a 4 for 1 stock split, meaning that a person owning a share of TSP Company at $100 now has 4 shares each worth $25. The above stockholder now has 400 shares each worth $25. The reverse can also happen if the worth of a company goes down and they need to consolidate the number of shares in an effort to increase the perceived value of the company. This is called a "reverse split".

Interest: When a stock increases in value, the amount it goes up is called "Interest" or "Gain". If the value of the stock goes down, it's called a "Loss". Totaling the amount of gain or loss is called "Return". Returns can be positive or negative, depending on if the value of the stock goes up or down.

Index: There are a lot of companies out there. The best way to think of an Index is as a pie chart. If there are 5000 companies in the Total US Stock Market, then that means there are 5000 slices in the Total US Stock Market Pie. Other indexes you may have heard of: Dow Jones, D&P 500, NASDAQ, etc.

S&P 500: The S&P 500 is a list of the 500 largest companies in the US Stock Market, representing about 80% of the brand names that you would easily recognize and thus the majority of the US economy. The S&P 500 pie has 500 slices. Apple is the biggest company of the US Stock Market, and it takes up about an 8% slice of the S&P 500 pie. Next biggest is Microsoft, then Exxon Mobile, then Johnson & Johnson, etc. The ticker symbol to follow is "$spx" on stockcharts.com.

Dow Jones: Also known as the Dow Jones Industrial Average or Dow 30, this is a listing of the top 30 companies in the US Stock market. The ticker symbol is "$djia" on stockcharts.com. There is no TSP equivalent to the Dow, but it is commonly heard and reported in the news as a stock market indicator.

Wilshire 4500 / Russell 2000: If the S&P 500 is a listing of the top 500 companies, then the Wilshire 4500 is the next 4,500 companies, while the Russell is the next biggest 2000 after the S&P 500. There are more than that, but below 5,000 companies are the really small penny stocks that really aren't worth trading for retirement investment purposes. Between the S&P and Wilshire 4500, you have the entire US Stock Market covered. Think of S&P as "Big Companies" and Wilshire 4500 as "Middle size and Small companies". The S Fund used to follow the Wilshire 4500, and before that the Russell 2000.

Dow Jones US Completion Total Stock Market (TSM): This is an index much like the Wilshire 4500 in that it is a list of all the companies not in the S&P 500. The ticker symbol is "$dwcpf" on stockcharts.com. The S Fund is now based on this list.

C Fund: The C Fund isn't traded on the Stock Market. Rather, the C Fund is an Index that is structured in an effort to mirror the S&P 500. If the S&P 500 pie shows as having 8% for Apple, 4% for Microsoft, etc, then the managers of the C Fund try to match that. It's not an exact science, so the C Fund will sometimes be a little better or worse than the S&P 500 in daily returns.

S Fund: Just as the C Fund is meant to mirror the S&P 500, the S Fund is meant to mirror the Dow Jones US Completion TSM index.

That's why when you see the S&P going up but your S Fund shares going down, it's because they are invested in different lists of companies.

When you invest in the TSP's Funds, you aren't buying individual stocks. A share of C Fund can be thought of as a pie with an 8% slice representing Apple, 4% Microsoft, etc. Any dividends those companies pay out are reinvested by TSP for you to purchase more shares, and thus your account increases in value because the dividends and interest are used to buy more shares, causing your account to grow.

Does this clear things up a little?

[n.shift]

Yes it does. It at least gives me some direction as to where to focus my attention at. Ty