Let's talk TSP strategy
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Anonymous
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So TSP issues pop up in this forum all the time. TSP was intended to be simple and is the envy of practically every other 401k plan available. I'd argue that TSP is the best fed benefit, even more than the pension. The proven way to success has always been making the maximum contribution, setting a stock:bond ratio that you're comfortable with, re-balancing a couple times a year, and then adjusting your bond holdings higher as you age. The G-Fund is the key cog because it never loses money, and is pretty much the only free lunch available in the investing world.
I don't do this. And I hate myself for it. The proven way is above, but with forever to go to until retirement (28-ish years), I tweak often and am practically gambling with my balance all the time. TSP fund performance year-to-date: 
TSP last 12 month's fund performance: 
My last 12 month's PIP: 
Not a brag, but just showing what an active approach can do. I'm completely aware of the risk, but at this point in life, I've got nothing but time. Making strategic inter-fund transfers can make for some excitement, but can cause some sleepless nites too. That 5.3% gain over the C-Fund is a huge chunk of money to me on a (very-low) six-figure balance. There have been losses too...I finished 1% under the C in 2012 and 2% under the C in 2013. But 2014 and 2015 so far have been rolling. I reason all this to the fact that gains in the market are typically slow and steady, but a 5-20% drop can happen in a single trading day. Missing a couple of big drops over the course of an investing lifetime could be life-changing, so I figure I have to buy a ticket to play. "Losing" in this situation would simply be having a little less by retirement. I estimate that I'm in 100% G about 20% of the time while hoping on that dip. A crash doesn't bother me if I'm holding stock, because I've got forever to wait for the market to come back. But the greatest worry is missing those good gaining days while holding the whole nut in G because those chances are gone forever. On the other hand, making a good move (buying 100% G at an S&P high point, then 100% back into C at any point lower) locks in the profit forever. Fortunately, 2015 has been good to me so far due to all the choppiness for the year. Anybody else this involved with their TSP? Or can someone convince me to straight up quit messing around with it? I've got no one do discuss with at work since the most common TSP issue discussed there is loans. 
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Anonymous
| Interesting. It is my understanding that Feds used to be able to do daily inter fund transfers but are now limited to three a month. |
Anonymous
OP here...Correct. Trades do cost a bit of money, and these folks (mostly from TSPtalk) were going nuts with it. Instead of buy, hold, wait, sell, repeat, those guys were going C > G > S > F > I in a single week. Most were proven to be losers by their own registered trackers. TSP prides itself on having the lowest fees anywhere, so that nonsense was cut out thankfully. Technically, you get three inter-fund transfers a month if your first and last buy is 100% G, but only two if the month's first buy is of C/S/I. The max possible is 30 a year nowadays. I avearge about ten a year, and am currently at 8 for 2015. Sometimes swaps don't work out. 11:59am is the deadline to get in an inter-fund transfer to catch the day's end closing price. On a day the S&P is moving in the favorable direction, it takes a turn in the late afternoon. One that always sticks out to me was a day when a 2+% gain was possible around 11:50, only to then make my move that resulted in locking up a 0.1% loss as the S&P dropped 35 points between 3-4pm. Hurts, but it happens. Like I said, you'll lose a little sleep. |
Anonymous
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And to add, since you're limited on trades, you've gotta use them wisely. I have a hard rule to always save the last for after the 20th of the month (if necessary).
Once I used them up by the 10th which did lock a gain, but ended up being a huge screw-up with how the rest of the month turned out. So lesson learned...never again. |
Anonymous
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I would love to hear what Barry Ritholtz would have to say about this.
Market timing studies have shown that people don't end up catching more ups than downs. Your own summary seems to admit as such. Sounds like you like the excitement and justify it to yourself by saying it's not really risky and you might actually be benefiting yourself. That is how most people justify bD decisions--which deep down you already know. |
Anonymous
| Check out the personal finance program on PBS during pledge week... I forget the guy's name, but he is local and talks about strategies for federal workers. I do recall him saying not to invest in G fund because it does not grow. I will post the link when I find it... |
Anonymous
See, this makes no sense. The monthly trade limit rules are arbitrary and set by TSP. Market changes arent tied to the monthly calendar. You can't be perfectly efficient in this setup, even if you had perfect information. |
Anonymous
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You are a fool. Invest in the appropriate L fund for you age, then forget about it.
Every single study - every single one - tells investors to time-average and focus on long-term returns, not try to beat the market on a day to day basis. |
Anonymous
| Not the OP, but the L Funds are too conservative for me. |
Anonymous
A fair opinion - invest as you see fit, but invest for the long-haul with dollar-cost averaging. Don't get caught up in this timing the market nonsense. |
Anonymous
OP here. Totally agree. L2050 currently has 15% in bonds, not to mention it includes the F-Fund (which is beyond unpredictable) along with the G. If it was G-Fund solely for the bond portion, I might consider it. L2050 is intended to be used by current twenty-something feds, but why would you want to ever be in bonds 30+ years out from retirement? 
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Anonymous
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True story, I used to work on Capitol Hill, and one of the thousands of meetings that stand out in my head is one with federal corrections guards.
I don't know if they had a lack of issues to discuss that year, but their main issue was overturning the restrictions on making trades! Apparently our federal prison system was once run by a bunch of day traders, who knew? |
Anonymous
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The OP mentioned a stock:bond ratio. Bonds were safe during the recession compared to stocks, but they're no longer the best investment now since the market is going up, up, up. You don't have to put money in a bond fund. I'm more aggressive even though I'm 58. All my money is in tsp stock funds. I remember a professor telling us bonds and stocks are inverse. One goes up, and the other goes down. That's still true all these years later.
The G fund can lose money. If the rate of inflation is higher than the rate of return in the G fund, then you're losing money. Let's say the G fund made a 3 percent gain in one year, but inflation was 5% for the same year, you lost 2% in that year. |
Anonymous
| The G fund's investment objective is to beat inflation. It will never lose nominal value (unlike stock and bonds funds). |
Anonymous
And of course, the market will keep going up, up, up without a pause or a drp, forever. Have you forgotten what happened in 2008 already? People who were near retirement and 100% in stocks got wrecked. |