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Federal employees who are accustomed to steady growth in their retirement funds have watched a startling reversal of fortune in the past year, and especially in the past few weeks. But despite the stock market's volatility, a small but vocal group of employees think they could beat Wall Street if they were given greater freedom to move their money between funds. The head of the Thrift Savings Plan says that their approach is unrealistic and could hurt their fellow investors.

"When you're deep in the woods and the markets are reacting violently, it may be difficult to see. But this is an opportunity to buy in at lower prices," said Gregory Long, executive director of the TSP. "I know it's tough for people to feel this way. The markets have been affected brutally."

The 4 million federal employees, retirees, and members of the armed services who use the TSP have invested $226 billion across 10 funds, all of which track the performance of the financial markets. Five of the offerings, the life-cycle funds, invest in different mixes of stocks and bonds depending on how close an employee is to retirement. The other five funds track the performance of government securities, companies abroad, small- and midsized American companies, the Standard & Poor's 500 index, and fixed-income bonds. With the exception of the government-securities and fixed-income bond funds, all of the TSP offerings have lost value this year, and some have fallen dramatically. The international fund's worth declined 28 percent between the beginning of 2008 and September 30, and the L2040 fund, an aggressive offering for federal employees who will not retire before 2040, is down 17 percent.

Long isn't just asking investors to weather the storm, however. In May, the TSP board limited the number of times investors could transfer money between funds to twice per month. (It did not limit transfers to the government-securities fund.)

Long and the board said that the restrictions were necessary because several thousand investors were making frequent transfers, trying to capitalize on times when the funds increase in value. Frequent traders were increasing the TSP's cost and passing the burden to their fellow investors, Long said. The TSP does not charge transaction fees, and the board has said that estimating the costs of individual transactions is too difficult to make such a system effective.

Because it takes a business day to process transfers between TSP funds, investors cannot time their trades to capitalize on daily market trends. Nor can they buy specific securities. Instead, they look to people such as Tom Crowley, a former federal employee and a TSP investor who runs TSPTalk.com, a popular message board for frequent traders, for advice. Crowley thinks the restrictions, instead of establishing a fair system of transaction fees, forced investors to accept an investment strategy that might not be best for them.

"I don't want someone to tell me how to manage my account. I also don't want someone else to have to pay for any expenses I incur," Crowley said. "If the TSP can show us just how much money was saved over the last year with the new limitations, then we will have an idea of how much these transfers are actually costing us."

Crowley has been surprised by the vehemence with which thrift plan officials opposed transfers after 4,000 TSPTalk participants signed a petition opposing the new rules. "In my little world, I thought I was helping," he said.

John Pope, a former Air Force officer who designed a method for tracking TSP fund performance that provides the basis for the recommendations of TSPKey.com, another federal financial advisory service, disagreed with the decision to limit transfers. But he acknowledges that limiting transfers probably makes sense when the market is especially erratic.

Long says he and the board listened to the objections of traders but weren't convinced that the benefits of allowing frequent trades outweighed the costs. "If there are people who want to trade back and forth, there are places outside the TSP where you can get that done," he said, "but it doesn't strike me as the smartest way to approach it."