TS Paul

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  • in reply to: Crossed Over 1M #30698

    TS Paul
    Keymaster

    Sorry, just catching up on the message board after being offline for a bit.

    If you crossed the million dollar mark back in September, the good news is that you will get to have all the fun of doing it again in the future as you almost certainly fell below it again during the recent downturn.

    I’m in the same place as you. I was comfortably over $1 million in my TSP and didn’t think it was likely I would be crossing that milestone again, but the $100,000 haircut I took over the past few weeks in the TSP has me back in the 900k’s.

    I don’t really have a retirement date in my head, but somewhere between three to seven years. I expect I will be working in some capacity after that, so not sure if I will be relying on TSP withdrawals at that point.

    So for what it’s worth, I’m not exactly, but somewhat similarly situated. And at this point I am still fully invested and will be for the foreseeable future.

    The TSP Allocation Guide www.TSPallocation.com


    TS Paul
    Keymaster

    I wrote that sentence poorly. What I meant to say was that if I didn’t think the I Fund was a good investment right now, I would have all of my money in the C Fund (and none in any of the other funds). The way I phrased that it could be read a couple of different ways, so I will hop back in and hopefully make that more clear with a quick edit.

    The TSP Allocation Guide www.TSPallocation.com


    TS Paul
    Keymaster

    When I say they will converge, I don’t mean they will necessarily come back together enough to be equal, but rather that they will come to be a great deal closer together.

    And the “inevitable” bit is based on the almost universal history of reversion to the mean in major indexes, meaning that anytime the P/E of an index is well out of the normal range, it is a safe bet that it will return to that normal range.

    Timing for that return is the hard part. I still think the I Fund is likely to outperform the C Fund (and the S Fund) over the next year, but whether that trend starts next week or six months from now isn’t something I can predict.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Welcome to the TSP Allocation Message Board #30693

    TS Paul
    Keymaster

    I don’t see the need for anyone to manage my money (at least at this point in life), so I like Personal Capital just for the free tools they provide. I am sure that some folks who aren’t inclined towards learning about investing, just don’t want to be bothered or will be less stressed if the decisions are out of their hands, would be better off finding someone they trust and letting them handle their investing.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: fidelity zero fee funds–worth it? #30618

    TS Paul
    Keymaster

    It is just a loss-leader for them. They will offer their two broadest, most basic funds for free to get new customers in the door, then sell them other funds and services once they are in the Fidelity ecosystem.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: fidelity zero fee funds–worth it? #30612

    TS Paul
    Keymaster

    I am a huge fan of low fees when I am investing outside the Thrift Savings Plan, so zero fees would be even better if I could get comparable returns. The fees on some similar products are so low as to be almost meaningless (the Vanguard Total Market fund is only $0.40 per year per $1000 invested, so if you have $10,000 in that you are only paying $4 in fees). I wouldn’t switch existing investments to the Fidelity zero fees funds from something for which I was paying a few dollar a year, but I will definitely take a look at what those two indexes are invested in and would consider them for future funds if I was looking for a very broad domestic or international index fund.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Recent Recession Talk #30575

    TS Paul
    Keymaster

    The huge amount of new spending which is ballooning the deficit is a concern. Congress has essentially created a huge stimulus program at exactly the wrong time and created conditions in which the economy could become overheated. That hasn’t happened yet, and it may never happen if the Fed keeps pumping the brakes in the form of interest rate hikes.

    The unemployment numbers remain stellar. The concern here isn’t that the numbers show a danger of the economy contracting, but again that with labor in short supply that wages will grow too quickly and create excessive inflation, leading to the whole thing tipping over into recession. Wage growth remains moderate at this point, so I don’t see that as a major worry in the near term.

    If something is going to cause major problems in the near future, I believe it will be Trump’s budding trade war getting out of control.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: I fund #30562

    TS Paul
    Keymaster

    The TSP I Fund is perfect if you want to invest in Japanese and Western European markets. The issue I have with the I Fund which I expressed in my writeup on the fund is that there are a lot of other investing opportunities overseas in other areas.

    The upcoming change to the index tracked by the I Fund will give it a broader reach, but will make it trickier for me to decide when to invest in it (it will combine developed and emerging markets). My preference would be to have more than one international fund in the TSP, but it is still a good step as the new I Fund will include faster growing economies.

    The “Look Forward at 2018” post explained why I believed the I Fund in its current form is a good investment right now.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Oil Stocks #30550

    TS Paul
    Keymaster

    I invested a disproportionate amount in the oil sector a few years ago after oil prices fell off a cliff. Now that they have recovered I have been moving towards bringing those investments back down.

    But I’m not in a rush. The biggest factor I see is the impending IPO of Saudi Aramco. To maximize the IPO sale, oil prices need to be high. And nobody is in a better position to move oil prices higher than Saudi Arabia.

    Plans right now appear to be for the company to go public on the Saudi stock exchange in the second half of 2018, and to be listed internationally in the US or the UK sometime in 2019. I think we will see efforts to prop up oil prices through that IPO.

    Longer term, the easy on/off of US shale production has really put a cap on how high oil prices can go. Anytime prices move above breakeven for shale producers, they start pumping and prices will fall again.

    Right now I own ConocoPhillips and Chevron on the production side, and Magellan Midstream and Enbridge on the infrastructure side. Those are all older investments and I haven’t thought at all about whether those are what I would buy if I was buying today, and in fact I might be more inclined to play oil prices with a sector ETF rather than individual stocks.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Is a change in order #30549

    TS Paul
    Keymaster

    Market volatility doesn’t ever impact my investing decisions. I talk a lot about that in my most recent update: http://www.tspallocation.com/april-may-2018-tsp-allocation-update/

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: impact of trade war tariffs on I fund #30548

    TS Paul
    Keymaster

    Sorry for the slow reply – this one slipped by me.

    I don’t think steel and aluminum tariffs will have any impact on the TSP I Fund because most of the I Fund’s component economies have been exempted already (the notable exception being Japan).

    There are a lot of moving parts, but I expect it to be roughly a net wash for the I Fund. Some countries will export less to the US, so steel/aluminum producers in those countries will be hurt. But producers in exempted countries will now face less competition and so will be able to raise prices on steel being exported to the US. And foreign companies which import steel will be able to get it cheaper from non-exempt countries than they could before, improving their profit margins.

    So in the end, all steel and aluminum imported to the US will be more expensive (a minor drag on the US economy), while EU and other exempted countries will see benefits both importing and exporting.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: larger mortgage down payment vs investing #30547

    TS Paul
    Keymaster

    From a straight math standpoint, let’s say you expect a 10% annual return on invested money and you are going to be paying 4% on your mortgage. That’s a 6% swing in favor of borrowing more so that you can have more invested.

    But there are always a lot of other factors in a decision like this – in your case the flexibility for your wife to work part time – which might outweigh the math.

    From my personal experience, I thought I was getting the largest mortgage I could possibly afford, but within a year or two it was very affordable through a combination of pay increases and those much-maligned automatic step and grade increases we feds get.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Welcome to the TSP Allocation Message Board #30470

    TS Paul
    Keymaster

    Not to sound defensive, but that link is to a TSP overview post in which the author identifies the same problems with the TSP I Fund which I complain about in this post http://www.tspallocation.com/tsp-i-fund-in-tsp-allocation-strategy/

    In her most recent (January 2018) blog post, the author says that she believes that international stocks will outperform US domestic stocks. This is a non-TSP specific post, but I suspect that she and I would be in pretty close agreement about investing in the I Fund in these circumstances. The I Fund isn’t ideal, but it’s the best we’ve got for international exposure in the TSP.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Back Door Roth re: 2018 Update #30356

    TS Paul
    Keymaster

    The process is exactly as you described above. I haven’t done the process with Vanguard, but if they handle it like Merrill Lynch does your traditional account will be closed when you convert it, so they will create a new account number each year.

    You can consolidate your conversions into the same Roth account though, so it all winds up in one account.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: how does the new tax plan affect the stock and housing market #30255

    TS Paul
    Keymaster

    I’m going to talk more about both of those subjects in the upcoming update, but some quick thoughts here…

    It will be interesting to see what exactly winds up in the final tax bill. I think that to large extent the short term benefits are priced into the market – we may see a small bump when it gets to final passage, but nothing extraordinary. Longer term, some individual stocks should see a serious bump (particularly companies with large overseas cash piles), and the market should generally benefit as the cuts start showing up in quarterly earnings reports.

    With respect to the housing market, if the proposed $10,000 property tax deduction cap stays in place that will definitely hurt the values of expensive properties in states with high property taxes. In Virginia, that should only be properties costing over a million dollar. In a place like Los Angeles or San Francisco, even buyers of “entry-level” homes will have thousands of dollars of non-deductible tax payments, so that will certainly constrain the ability of some people to buy and cause prices to flatten to some degree.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Should I have more diversity #30254

    TS Paul
    Keymaster

    That completely depends on how soon you plan to use that money and your tolerance for a downturn which could take 25% of it away.

    If you are in the L Fund for your year of retirement, you will see virtually no capital appreciation. That can be hard to swallow when other funds are up 20% this year.

    I wrote in a lot more detail about my plans as I near and enter retirement in the FAQs: http://www.tspallocation.com/faq/#number4

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Vanguard fees nearing TSP #23743

    TS Paul
    Keymaster

    They say you learn something new every day, this was it for me today. From the article Charles linked to:

    The TSP has a little-known rule that will be your friend in retirement years. As long as a TSP account has $200 or more in the account, you may transfer money back into the TSP. Remember your traditional IRA? As the balances in your G Fund at the TSP get lower, consider transferring some of your IRA funds back into the TSP. This will replenish the pool of money you are using for income. Statistically speaking, real growth will have occurred in your IRA funds and you will be able to transfer some of that growth back into your income stream. Remember: this can continue as long as you maintain at least $200 in the TSP account and you still have traditional IRA balances. Roth balances are NOT allowed to be transferred to the TSP at this time.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Impeachment/Treason #23644

    TS Paul
    Keymaster

    I’m a little surprised you haven’t received some angry responses to this post.

    I have not reached, nor am I anywhere near, the point of thinking domestic politics will cause a market crash. My best guess is that the market will continue to move slowly up. And as far as I can tell, interest rates are poised to go up again shortly. That would result in the F Fund losing value, so I wouldn’t be keen to swapped to F.

    I suppose if I really needed a safe haven right now, the G Fund would be my choice. But as nervous as the market is making just about everyone right now, the economy continues to get stronger and there is no real reason to think growth won’t continue over the next 12-18 months.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Vanguard fees nearing TSP #23643

    TS Paul
    Keymaster

    The drop in fees for Vanguard and its competitors has been fantastic and makes it much more palatable to pull your money out of the TSP when you retire. Hopefully the TSP’s proposed changes to withdrawal options will be approved and that won’t be necessary any more soon.

    I am not familiar with a mechanism for putting more money into the TSP after you retire. I’m not retired or even close yet, so I put very little thought into that aspect. Hopefully someone else will be along with a better answer shortly.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: F fund vs BND #23519

    TS Paul
    Keymaster

    Usually BND performance would be very close to the TSP F Fund, but because of the Fed’s intervention in the bond market they are much further apart than usual. The reason for that is BND tracks the Barclays Capital US Aggregate Float Adjusted Bond Index which is identical to the Barclays Capital US Aggregate Bond Index (which is what the F Fund tracks) except that it does not include bonds held by the Federal Reserve. Because treasuries currently make up 1/3rd of the index, and the Fed currently owns about $2.5 Trillion in treasuries, that is a very significant change.

    The Fed is likely to start winding down those huge positions towards the end of this year by not reinvesting funds received after treasuries mature, so the two indexes will start to come back into alignment. It will take awhile though – about 40% of the treasuries held by the Fed have maturities of greater than 5 years.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Transfer to C fund when stock prices high? #23517

    TS Paul
    Keymaster

    Check out FAQs #2 and #3. http://www.tspallocation.com/faq/#number2

    In general, if I think we are in an improving market, I will move my money all at once. If I am unsure or am trying to find the bottom of a declining market, I will move my money over time.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: 10% penalty for early withdrawal of tsp #22679

    TS Paul
    Keymaster

    That’s way outside my limited expertise, so hopefully another reader will have some idea.

    If you don’t get an answer here, my go-to guy for questions like this is Dan Jamison at fersguide.com.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Investing outside of the TSP #22562

    TS Paul
    Keymaster

    The market is so hot, there aren’t a lot of individual stocks which really appeal to me right now and none which I am moving into. A few random thoughts which occur to me today:

    I think oil still has a lot of upside even after the recovery we have seen since the lows of 2015. The nice things about the big majors is that they also pay some nice dividends, so I will have a steady stream of income even if it takes some time for the oil market to sort itself out.

    A couple of other high dividend payers which also have some growth potential are REITs: APLE (which owns a lot of hotels) and SNH (which owns a lot of nursing homes). I don’t currently own either of those.

    Big retail banks (BofA, Wells Fargo, Citi, etc) should do well with interest rates moving up. I feel like I have enough exposure between the ETFs I own and my Berkshire Hathaway, so I haven’t taken a hard look at at picking one or two.

    Apple has had a big run over the past year, but I think the iPhone 8 is going to create a super cycle for upgrades and there will be a deal struck which will allow them to repatriate a lot of their overseas profits. Some of that is priced in. I own a lot of AAPL – it is my single largest individual holding (not because it started that way, but because it has done so well since I bought it and there has never been a time I felt I should take some of my profits out and just roll them into an index ETF).

    I think ESRX is a great company which has been beaten up recently and should come back. A P/E of 12 on a company which has shown consistent growth seems unreasonably low and I expect the stock price to be back in the 70s before too long. I own a little ESRX, and will probably double that position as I have some cash come free.

    None of those are recommendations – just random thoughts and a little bit about what I am doing.

    The TSP Allocation Guide www.TSPallocation.com


    TS Paul
    Keymaster

    It has been a long time since I was in your shoes. In my case, I wasn’t yet maxing out my TSP but I was getting pretty close. When I started getting serious about buying a house I was able to save the minimum I needed for my downpayment without cutting my TSP contributions, but it definitely added a couple of years to my getting to the max.

    In general, because the expected return on investments in the stock market are so much higher than on a home (which is just 1/2% more than inflation per year on average in the US), from a financial standpoint you should put off buying the house and get your money to work compounding in the market. But it’s not just a financial decision – owning a home is very important to a lot of people, so I think it if fine to make that a priority. Just don’t go overboard and saddle yourself with such a large mortgage that you aren’t able to return to prioritizing retirement contributions in pretty short order.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: P/E Confused #22532

    TS Paul
    Keymaster

    I did leave out all the math in my post today in an effort to keep things concise.

    The S&P 500 is at 2381 today (3/16). Projected earnings per share for 2017 is about $130/share.

    2381/130 = 18.31

    There are, as you noted above, a lot of different ways to measure the P/E ratio of the market. The classic way is to use 12 months trailing earnings. That gives a pretty high number, but I think it is pretty well accepted that we will see a much larger than normal increase in earnings in 2017 because they were suppressed so much by the energy sector last year. Low oil prices gutted the earnings of a big slice of the market, but with oil back above $50/barrel those earnings are going to gap up in 2017. So I tend to lean towards projected earnings as being a more realistic gauge.

    Schiller P/E is whole different beast and there are entire books written about when it is a good measure and when it is thrown off. I haven’t looked at it in a while, but my basic recollection is that historically when it was over 20 a crash was sure to follow, although that crash might not come for several years. The problem is that it has been over 20 for virtually all of the past 22 years. The workings of the modern stock market may be different enough now that we can’t rely on on the measure which worked in the past.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Close to Retirement #22531

    TS Paul
    Keymaster

    I wrote about just that on the Frequently Asked Questions page: http://www.tspallocation.com/faq/#number4

    But that shouldn’t be the final word – I hope other readers will share their thoughts as well.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: How about this bull market!!! #22341

    TS Paul
    Keymaster

    The bull market should continue – no bad economic news and nothing else on the horizon to tip us into a bear market in the near term. But I would have bet a lot of money on a 5% correction by now this year, so I agree that the current run has gone a lot longer than most and longer than I think anyone expected. Even when we see that correction, though, I don’t think there is any reason to think we won’t bounce back relatively quickly.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: not receiving updates #22338

    TS Paul
    Keymaster

    Sorry for the silence. The “Look Forward at 2017” wrapped in the January update, and February is a short month after all. There really hasn’t been much to write about – no big changes in the economic news and the market keeps working its way higher. I will get out a proper update in a week or two once all the February economic numbers come in.

    And Mark, I will go look for your email now.

    Thanks for missing me. 🙂

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: S Fund? #21260

    TS Paul
    Keymaster

    I will write more about the S Fund in my next update, but the short answer is no. Other funds will outperform the “indicated” fund in the business cycle strategy all the time, but unless the relative valuations of a non-indicated fund to the indicated fund are just ridiculously far apart, I wouldn’t try to outsmart the business cycle.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Military TSP Advice #21259

    TS Paul
    Keymaster

    I will let others in your situation who have studied the options more than I have give more detailed advice. From my perspective, the TSP is pretty hard to beat when it comes to extremely low fees and ability to loan money to yourself if that makes sense, so I personally will not be in a rush to move my money somewhere else.

    The greatest advantage of an IRA from my perspective is the ability to invest in a wider variety of funds, but I am happy with the TSP fund options for most of my money.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP Loan #21087

    TS Paul
    Keymaster

    My understanding is that you are only eligible for $15k until twelve months has passed since that balance was paid off.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Source for returns? #20476

    TS Paul
    Keymaster

    TSP.gov updates their share prices page daily at:

    https://www.tsp.gov/InvestmentFunds/FundPerformance/index.html

    From there you can do the math yourself if you are so inclined.

    I don’t like to reinvent the wheel, so I usually go to tspcenter.com’s Charts and Returns page at:

    http://tspcenter.com/tspReturns.php

    That page has about all the options I really need to look at the individual TSP funds over various date ranges.

    Eventually I plan to develop a page on this site which will do all of that plus allow comparisons to various economic indicators, but that will have to wait until I have some spare time or I stumble across a talented volunteer.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: aug update #19879

    TS Paul
    Keymaster

    I am. Just sitting down to put my thoughts to screen. Will get that up Sunday or Monday if I don’t get distracted.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Did we dump our S shares prematurely? #19419

    TS Paul
    Keymaster

    Funny, all last year when the TSP C Fund was doing better than the S Fund, I felt like I hadn’t dumped it soon enough.

    From a business cycle investing perspective, large caps (the C Fund) is the right place to be right now. But that certainly doesn’t mean that we won’t see periods of time (sometimes extended periods) during which the S Fund outperforms the C Fund.

    I’m not sure what period of time has you concerned, because that doesn’t seem to be the case right now – the C Fund has outperformed the S Fund by about 6% over the past 12 months, and by about 1% so far this year.

    The TSP Allocation Guide www.TSPallocation.com


    TS Paul
    Keymaster

    By happy coincidence, I have a little extra cash on hand right now and have been weighing my options. I will write a little bit more expansively on that in this month’s update, but the short answer is yes, TSP C Fund and Vanguard equivalents are where the bulk of that money is going to go.

    The TSP Allocation Guide www.TSPallocation.com


    TS Paul
    Keymaster

    Anne – the second post in this thread was my plan.

    Nothing has really changed since I wrote that. I was happy to see the markets turn around as strongly as they did yesterday and today, but I expect we will see some additional Brexit induced volatility as new developments come out over the coming weeks and months.

    The TSP Allocation Guide www.TSPallocation.com


    TS Paul
    Keymaster

    One guy’s take: my allocation will remain 85% C and 15% I for the short term, but I will likely move to 100% C Fund before long.

    I’m not leaning towards moving out of the I Fund because I think the UK vote to leave in a few years by itself will be so damaging to international developed markets, but rather because this will create ongoing uncertainty and raises the specter of other countries following the UK’s lead, creating additional fundamental concerns swirling around the European common market.

    But I also won’t dump the I Fund immediately after this setback. Selling after a sharp drop is never a good idea unless the underlying economy in question is concurrently going into recession (in my opinion). From a business cycle standpoint, I think the I Fund should bounce back in the short or mid-term and will recover most or all of its losses from today. But even though I think the selling was overblown, I’m not nearly confident enough to jump into a larger I Fund allocation.

    I will reevaluate my position regularly, with a long-term bias towards selling.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Transitioning back into the market #18983

    TS Paul
    Keymaster

    There’s that pull-back Anne was talking about. 🙂

    Will – one of the FAQs is somewhat responsive to your question: http://www.tspallocation.com/faq/#number3

    My default is to be in the market, so absent strong feelings which make me feel I should take the move slowly, I tend to make the move to where I want to be immediately and all at once.

    But as always, that’s just me and what I’m comfortable doing under my circumstances.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: C and S Funds #18729

    TS Paul
    Keymaster

    That is odd – I tried to fix the links, but either WordPress or the message board software really doesn’t seem to like those periods in the middle.

    Edited to add: I tried creating tinyurl links, but that failed miserably as well. So I finally had to recreate the charts, given that I had lost the original links when I edited to add the tinyurls. This will teach me to muck about in other people’s posts.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: I'm nervous #18565

    TS Paul
    Keymaster

    Thanks for the great topic.

    I don’t see large volumes of “doom and gloom” media reporting as a possible indicator of impending recession. Media outlets are in this for the money. Depending on which study you are looking at, bad news or negative headlines results in up to a 69% higher click through rate on the internet. And the same is true for television – negative news attracts a much higher level of engagement than positive or neutral news. I don’t believe the economic news is worse these days, I just think the folks who make their money selling advertising are following the dollars into the abyss of selling disaster and calamity.

    As for whether or not the economy is going to tank, I don’t believe it is based on the indicators I look at. And I haven’t seen any sources I consider credible suggesting that the probability of recession in the next year is higher than 20% (and most of the sources I follow put it lower than that).

    None of which is to say that some significant external event couldn’t tip the US economy from its anemic recovery into a sudden recession (taking our Thrift Savings Plan balances down with it), but I really don’t think we are headed there on our own.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Fed Trader #18551

    TS Paul
    Keymaster

    The email notification about a message board post with “Fed Trader” in the subject line was enough to get me onto the phone and back to the message board.

    I am half tempted to delete this thread because I don’t want for this to become a TSP Allocation Guide vs. The Fed Trader thing, and I am very sensitive about hosting something negative about another writer in the small Thrift Savings Plan space. But I haven’t deleted any threads to date, and this doesn’t really cross any thresholds, so I will leave it up for now.

    Touching on a couple of your points quickly:

    – while I am glad that you found some value to what I wrote last summer, I do hope that the TSP allocation guide website was only one of many sources of information you considered and you don’t make any decision based solely on what I write.

    – while I obviously favor my strategy over that of the Fed Trader over the long term, remember that anything over a period as short as the one I was discussing is just an anecdote. There may well be plenty of six month periods when the Fed Trader has outperformed me.

    – thanks very much for the donation. It appears that my monthly hosting expenses are going to quadruple to get the site onto a server which can keep up on the days I post an update, so I will spend it well. (PS, Bluehost tech support and customer service are terrible.)

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: 2016 Earnings Season effect on the market #18501

    TS Paul
    Keymaster

    I generally think of the effects of one particular earnings season as confined to the short term. Earnings are managed and telegraphed so well these days that I doubt we will see many surprises and I suspect they are fairly well priced in.

    Long term, I don’t see these earnings as presaging a fall in the US economy, but rather reflect the strong dollar and low demand for oil and other commodities.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Abnormal Business Cycle? #18500

    TS Paul
    Keymaster

    I absolutely believe that every business cycle is different and they will continue to evolve as time passes. I generally don’t go back much further than the 60s or 70s when I think about the modern stock market, and even then things are completely different today than they were then.

    This one in particular has likely been dramatically effected by the Fed’s activism – I haven’t gone back to check recently enough to recall, but I can’t imagine we have had such a sustained run of artificially low interest rates in modern history.

    And to 12^2’s point, investor psychology certainly impacts the market in the short and medium term. I tend to believe that effect on the Thrift Savings Plan largely wears off as we stretch to long term, but there may well be something to the notion that millennials continue to duck the stock market because it tanked right about the time they first became aware of it.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Inflation #18499

    TS Paul
    Keymaster

    🙂

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Inflation #18498

    TS Paul
    Keymaster

    🙂

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Inflation #18490

    TS Paul
    Keymaster

    The most basic reason is the Fed believes that some low level of inflation is necessary to drive spending, which makes businesses more profitable, which means they can hire more and pay their workers more, which means those workers will spend more.

    The first bit is the tricky one, but the idea is that consumers will make purchases now (which initiates this golden cycle) rather than waiting if they believe that prices are likely to go up, even a little bit. In contrast, if prices are flat or declining, consumers have every incentive to postpone purchases, which keeps the cycle from starting.

    Another key effect is that inflation allows people and companies which borrow to pay back that debt with funds which are less valuable than the money which they borrowed. Borrowing leads to more spending, which gets us back to the basic reason.

    Keeping interest rates low even when the inflation rate met exceeded their target made sense to the Fed a few years ago because the unemployment rate was still higher than their “full employment” target. So those low rates led to more borrowing which led to more spending. Now that the unemployment rate has fallen into their target range, they want to make sure that inflation doesn’t get out of control, so they will raise rates to try to slow spending.

    The reason we have business cycles is because this is not an exact science and there are other inputs as well. At some point, things will get pushed too far in one direction or the other and we will have to live through the economy rebooting itself again.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: National Debt and Unfunded Liabilities #18479

    TS Paul
    Keymaster

    Lots of different issues raised in that very short question (most of them very politicized these days), but I will take a swing at the ones which spring immediately to mind:

    – the very short answer, is that I don’t believe it will in this generation. And projections which go out for decades beyond that can’t take into account all of the dramatic, unforeseen changes which almost certainly impact the economy during that time.

    – fiscal policy (government spending) will definitely impact the stock market over and over again for as long as we are a democracy. Typically what we will see is the legislative branch doing exactly the wrong thing at critical points in the business cycle, causing greater volatility than is necessary (cutting spending when the economy contracts which causes the economy to contract even more, and spending like a drunken sailor when the economy is expanding which causes the economy to overheat).

    – the huge scary numbers for unfunded liabilities which get thrown around are based on projections which go out for decades. Even if they are completely accurate (which is questionable because they assume that costs will continue to grow at a continuous rate over decades and no major policy changes will be enacted or technical advances achieved which will impact those), those big numbers from the distant future are typically applied to today’s economy (which is a fraction of what it will be at that point in the future) and today’s population (which is presumably much smaller than that of the US in 75 or however many years in the future).

    – the big money items when we talk about unfunded liabilities revolve around health care/health insurance. I can’t imagine that health care in the US will look like the current model in 20 years, much less further into the future. I suspect there will be major changes within our lifetime – whether we decouple health insurance from employment, go to a single payer plus system, find ways to limit the incentive to maximize profits from health providers, or some combination of those and other changes.

    – as we look decades out into the future, the US’s extraordinarily large defense/national security budget means that the US has a very large amount of discretionary spending which can be diverted to other uses. Because these programs are so large, even a very small reallocation would completely change the math.

    None of which is to say that the US (and many other governments) aren’t doing a lot of dumb things. But I tend to believe that the continuous growth of the US economy and meaningful changes to government programs will allow us to absorb what look like insurmountable fiscal problems without a complete meltdown in the future.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Thoughts on credit bubble #18468

    TS Paul
    Keymaster

    Ironically, Davidson was apparently the other founder of the umbrella company (Agora, Inc) which I referenced above when talking about Bonner. Birds of a feather as far as I can tell, they exist to sell newsletters and books, and they prey on investor’s fears to do so. Both have been preaching financial collapse for several decades now, a period during which the stock market has soared and anybody listening to them would have missed out on their investments doubling several times.

    It is funny that a Bonner ad came up on the website – it could be that the Google algorithm was influenced by the mention of him on the message board. I sometimes cringe when I see the ads which display on the TSP Allocation Guide website. It makes me happy when I see Vanguard pop up, or companies and products completely unrelated to investing. But some of the investing stuff looks a little questionable.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Thoughts on credit bubble #18413

    TS Paul
    Keymaster

    Nonsense doom porn. He has been predicting the credit meltdown since 1993.

    While his economic predictions are garbage, he is very good at email marketing – his publishing umbrella company made $500 million last year peddling biblical cures for cancer and other somewhat dubious products.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Monthly Update Questions #18380

    TS Paul
    Keymaster

    Anne/all

    Sorry for the slow response, I have been neglecting the message board while traveling and then got sucked into March Madness a bit.

    The overarching question (how I actually apply the indicators to making decisions about when to pull my money to the safety of the G or F funds) is also a big one, so I didn’t want to give it short shrift. I cranked out my thoughts on the indicators I follow when I started the site and never went back to refine those explanations and talk about decision points, so that is something I need to do.

    To save folks scrolling back and forth, I’ve copied Anne and Kristopher’s questions below.

    First, Anne’s:

    PMI has been on a downward trend for the last 6 months with 4 being below 50. How do you figure this contraction not to be problematic? Or at what level would a number below 50 be considered problematic?

    PMI is just one of the indicators I look at, so a dip to just below 50 for a few months won’t worry me too much. As long as the bond and labor markets are behaving appropriately, I won’t be swayed by a few months of borderline PMI. And because it is a sentiment survey, we often see downturns in the stock market reflected in subsequent months, so to some extent I assume that a few points may be temporarily due to doom and gloom over the corrections rather than actual manufacturing outlook. Finally, a contraction in manufacturing does not necessarily mean a contraction in the overall economy – the PMI typically has to drop below 44 for an extended period of time for that to happen.

    I was also looking at M2 and trying to figure out what the correlation to the business cycle is. I came across a couple of sites that indicate that M2 has been less reliable in recent years and that it did not signal the last recession.

    M2 growth rate is definitely the least intuitive (for me at least) and I will have to go back and dig out the research which convinced me it is worth trying to puzzle out those thousandths every month. I will expand on that part of the site (which I recognize is pretty slim) when I get some time.

    And Kristopher’s questions:

    By the time you see strong signs for a recession is it too late to switch to the F and G fund? I just figure by the time we see strong signs the market has already dropped considerably because everyone is running for safety.

    There is a big difference between a few pieces of negative economic news which might trigger a sell-off and an actual turn in the economy. I don’t worry about corrections such as the ones we have seen recently because the indicators I follow aren’t going to predict those. The signs that a major change in the economy is coming are not entirely consistent from one cycle to the next, but typically recessions are preceded by some pretty strong warning signs. Just off the top of my head, I recall that 2008 was preceded by both inversion of the yield curve and a ramp up in unemployment before the big drops in the stock market. At the time, I couldn’t tell you if it was going to happen the next day or 9 months from then, but it was clear that there was a high likelihood that it was coming.

    What are you looking for to move your funds into the F and G fund? The market is weak and we just had a massive correction or which may be the start of things to come.

    This is overly simplistic, but I’m looking for a combination of the indicators I talk about each month to point towards recession. When they are pointing towards growth, as they have been pretty consistently since 2009, I don’t parse the numbers and look for small signals. Each month if I spend five minutes and see that employment is growing and wages are strengthening, that the yield spread is wide, that M2 growth hasn’t disappeared, and the bottom hasn’t dropped out of manufacturing – I’m done. As long as we are talking about the business cycle strategy, there is really nothing else for me to even look at in an economic environment like the one we are in now. Short and medium term market movements aren’t going to be a factor in that decision for me.

    When some combination of those indicators start pointing in the other direction, I will put the time in to research the details and compare the changes to past cycles. And at some point the evidence is strong enough that you are convinced that the end may be near and you make that long-term decision to get out of stocks.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: European Central Bank to Expand QE #18379

    TS Paul
    Keymaster

    There probably isn’t much else the ECB can do – monetary policy can only do so much to stimulate the economy. What Europe (and all developed economies need) is a proper mix of monetary (central bank) and fiscal (government spending) policies. Unfortunately, politics in both Europe (as dictated by the German’s push for austerity) and the US (where all spending is apparently bad) dictate that the fiscal part of the equation will be left undone.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Switching lanes within the market #18308

    TS Paul
    Keymaster

    12^2: Thanks very much for sharing your thoughts. I will spend some time digesting your ideas and playing with the numbers and see if I can make them work for me. I like the idea of simple ratio comparison, but it would take a lot of convincing to get me to change to something more complicated than my simple (overly simple?) strategy.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: The Advice on That Other TSP Site #18273

    TS Paul
    Keymaster

    Don’t worry, John, you can say the names of other TSP sites on this message board.

    (Interestingly enough, the only reason the message board on this site exists today is because the folks at TSP Talk wouldn’t approve my membership over there because they were afraid I was going to promote this site on their board. I was actually going to refer people from this site to have discussions on their board rather than going to the trouble of setting up my own, but apparently they were concerned about something other the free exchange of ideas…)

    As far as reading other sources of information about investing, I strongly encourage readers to do exactly that. I get information from dozens of sources and am regularly looking for new ones.

    For what it is worth, a few of the ways I select new sources of information:

    (1) I very seldom read anything on TSP specific websites. The TSP is made up of very broad market indexes which lots of people in the bigger world write about, and I generally find more sophisticated, thoughtful analysis from sources who are looking at the markets and economy from that broader perspective. The world’s brightest economists and financial minds are not spending their days focused on the Thrift Savings Plan. (I know my place in the world – I am not having any original thoughts or breaking new ground on here. I am just explaining how what some of the really smart folks out there are saying translates to investing in the TSP.) That all sounds very snarky, and I don’t mean to belittle some extremely clever people out there who write very helpful things which are specific to the TSP.

    (2) I don’t pay for anything these days except for the Wall Street Journal. There is more good, free information out there than I have time to read, so I don’t feel the need to pay for someone’s opinions.

    (3) I run screaming away from anyone who makes investment decisions based on their “gut.”

    (4) If I read the work of someone who purports to forecast what the market will do in the short term (the next couple of months), I do so with a wrinkled nose and through tightly squinted, cynical eyes. Because if they could really do that with any regularity, they would be billionaires and would be too busy having their cats cloned in various colors to be interacting with the likes of us.

    Good luck out there.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: I Fund Question #18269

    TS Paul
    Keymaster

    If you look at my July 2015 update, I explain why I believed moving a small amount to the TSP I Fund made sense (at least in my circumstances).

    The very basic nutshell is that markets almost always make their most dramatic gains early in the recoveries of the economies which they represent. That’s what we saw a few years ago in the TSP S Fund. Because the economies represented by the I Fund are still in that recovery phase, I believe there is a better opportunity for an outsized return there. But I am also cautious enough not to make too large a bet on that belief in my Thrift Savings Plan.

    Thanks for the question.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: I Fund Lag #18259

    TS Paul
    Keymaster

    You have way too much time on your hands. 😉

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Message Board Issue/Question #18222

    TS Paul
    Keymaster

    Topics and replies should all display on a single page now. Not a perfect solution, but better than where we were. Thanks for letting me know about the problem.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Message Board Issue/Question #18141

    TS Paul
    Keymaster

    Thanks for bringing that to my attention – I tried it in Safari, Firefox and Chrome with the same result.

    I will try to track down a solution in the next day or two and get it working correctly again.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Correction or Meltdown? #18007

    TS Paul
    Keymaster

    I know I sound like a Pollyanna during each correction when I talk about how I ignore them or use them as opportunities to buy stocks on sale. If I could predict these or call the bottoms on them, I certainly would, but despite my best efforts when I was a younger investor that was not a code I could crack.

    So I pull back a bit from looking at the financial media during these events and take the long view. Absent a recession (which we do not have right now), the market is going to go up. But it’s not going to go up every day – there are going to be a lot of down weeks and months along the way. I get some comfort from taking a look at all the dips and stumbles over the past few years in the attached chart, but also looking at how much higher we are than where we started.

    Attachments:
    You must be logged in to view attached files.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Allocation #17897

    TS Paul
    Keymaster

    That should have been a -2.92% return for 2015 if you were 100% S Fund.

    I’m making a somewhat belated move from the S Fund to the C Fund in my Thrift Savings Plan, and have a bit allocated to the I Fund as well. But that’s based on my circumstances and my reading of the Business Cycle strategy, so not at all something you should mirror unless it coincidentally fits your specific circumstances as well.

    Good luck out there.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Shaking in my boots #17887

    TS Paul
    Keymaster

    For what it is worth, I am staying right where I am. This is a global reaction to some of the air being let out of the Chinese market bubble. I don’t see it getting a lot worse, although it will likely continue tomorrow (traders don’t like to hold positions over the weekend, especially when things are as volatile as they are right now) and it could certainly continue for a few more days into next week. I won’t get nervous unless the losing streak stretches well beyond where we are now.

    Good luck to all of us.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Vanguard Funds for 2016 #17870

    TS Paul
    Keymaster

    Hindsight being what it is, I’ve kicked myself for not being in any healthcare specific funds or ETFs the last few years. I certainly knew that the ACA was going to have an effect on that sector, but didn’t ever get smart enough to decide between the competing arguments for and against it. Now I suspect the big gains have already happened, but with the US’ aging population there may be a lot more run out there yet.

    As for VGHCX, that has had an awesome average annual return – one dated article I just skimmed claimed that it had the higher return of any Vanguard fund over the past 30 years.

    I would hesitate to take on too much exposure in a relatively narrow sector, but that one is definitely on my shortlist to look more closely at and may well wind up in one of my Vanguard accounts.

    For anyone who does take a fancy to health care funds, make sure you note that he Vanguard Health Care ETF, despite the similar name, is a completely different fund (it is an index fund rather than actively managed), and has not done nearly as well as VGHCX.

    Thanks for the food for thought.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: 2015 TSP Returns #17869

    TS Paul
    Keymaster

    I don’t use any fantasy TSP sites – just no time for that sort of thing in my schedule. And I suppose I am already laying myself out there and competing publicly enough with this site. No fantasy sports for me either though, so maybe that’s a theme with me.

    And I do see that TSP.gov’s 2015 numbers match yours. Good catch.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: 2015 TSP Returns #17860

    TS Paul
    Keymaster

    That’s odd. I always get my numbers from TSPCenter.com’s Charts and Returns page. I assumed that their system was using the same simple formula as you did above. We will have to see what TSP.gov comes out with when they get around to updating it this week (although but some of their numbers have been off in the past). It does seem like they, of all websites, should have things set up to update automatically after the close each day.

    I have had getting updated-daily TSP returns onto the website as a goal for a while, but that is beyond my programming/website design abilities at this stage so I will have to outsource or find a volunteer to do it when I eventually get around to that.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: transitioning vanguard funds to C fund equivalents #17858

    TS Paul
    Keymaster

    If I were going to be in just one, I would choose the Vanguard 500 Index. But I’m not in a huge rush to be 100% large cap and I still have a bit in the Total Stock Market Index Fund as well. As we are in the transition period, I’m not feeling that there is an absolute hard and fast “right” fund to be in, so I’m comfortable keeping that relatively low percentage of my investments in this one for now (particularly as I hold that in a taxable account and I’m never in a rush to create a taxable event).

    All that said, I will definitely look at it again in a few months after my entire Thrift Savings Plan balance has transitioned across and at some point move those funds to Large Caps as well.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Vanguard Funds for 2016 #17857

    TS Paul
    Keymaster

    For my Thrift Savings Plan equivalents, for large cap I use VOO, which is the Vanguard 500 Index Fund. The expense ratio on this is a ridiculously low 0.05%.

    If you prefer mutual funds, VFIAX is the matching admiral shares ($10,000 minimum) fund. This one is also available as VFINX which is the investors shares version ($3,000 minimum). I generally prefer ETFs to mutual funds, but because I had a mutual fund account set up with Vanguard from many, many years ago, I’ve maintained that and invest only in Admiral shares.

    I typically go with the straight large cap fund rather than playing with the large cap growth (VOOG) or value (VOOV) funds. On occasion if I feel that one is really undervalued compared to the others, I will put some money in there, but the vast bulk of my investments go into VOO during this phase of the business cycle.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: new tsp allocations for 2016 #17739

    TS Paul
    Keymaster

    Depending on which agency you work for, you may have 27 pay periods for Thrift Savings Plan contributions. I will research that a bit and try to have some definitive details in the December update.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Money Personality Types #17737

    TS Paul
    Keymaster

    Not surprisingly, I am an “Investor” as described in the first article.

    And I am an ENFP, for whatever that is worth.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: tsp vs ira #17374

    TS Paul
    Keymaster

    This thread is generically about whether or not to stay in the Thrift Savings Plan or roll over into an IRA. I have an entire post regarding my views on the Traditional vs. Roth TSP decision:

    http://www.tspallocation.com/traditional-vs-roth-tsp/

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Getting Started #17347

    TS Paul
    Keymaster

    First off, definitely don’t make investment decisions based just on what you read here – this site is just supposed to provide food for thought. I don’t stress about my own investments at all, but I wouldn’t sleep at night if I started worrying about all of our readers.

    I covered my views on changing allocations all at once or over time on my FAQ page which you can find here:

    Frequently Asked Questions

    Good luck.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: How to calculate year-to-date performance? #17346

    TS Paul
    Keymaster

    I actually don’t do that routinely for my Thrift Savings Plan. I have a reasonable sense of how things have performed in my head and am not concerned enough to want to know precisely.

    For the purposes of the last update, I went to TSPcenter.com and checked the TSP S Fund return from 1/1 through the date of my transfer. Then I checked the S Fund and I Fund returns for that date to the date of the update and multiplied those by 85% and 15% respectively. Then added those all up to get my return for the year to date.

    I’m sure there is a more elegant way to do that, but it worked for my purposes.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: C or S Fund #17344

    TS Paul
    Keymaster

    I have always been leery about sharing my returns from before I started the website, because claiming returns from before I was posting them publicly just seems very sketchy. Now that I have been going for a few years though, I should at least have something up on the site somewhere summarizing the information from that period. I’ll put it on my to-do list.

    In the meantime, FWIW I was in the S Fund exclusively from the end of the downturn in 2009 until a few months ago when I changed to my current allocation. So the full years since 2010 have been 29%, -3%, 18.5%, 38.3%, and 7.8%.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: tsp vs ira #17306

    TS Paul
    Keymaster

    I’m sure that you will get a number of different responses to that question, because the answer can be very different depending on your situation.

    I love the Thrift Savings Plan for its very low expenses, so all things being equal I am likely to keep most of my money in the TSP. But the withdrawal options are limited so that may be a factor for me in moving at least some of my funds to a vehicle with greater flexibility (assuming they don’t change it by then – I expect they will).

    If you are in a position to make withdrawals prior to age 59 1/2 and think you might want to do that, then you would need to leave your money in the TSP because that is not an option with an IRA.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Where should my money be now? #17305

    TS Paul
    Keymaster

    Volatility is a good thing, as long as it is in the right direction.

    The G Fund is the only “safe” fund in the Thrift Savings Plan, and it is true that any G Fund allotment in a Life Cycle fund will not be volatile. Because we were in that long bond bull market a lot of people see the F Fund as safe, but it is easy to lose money there too, particularly once interest rates really do start going up.

    As far as I’m concerned, the L Funds are only good for ensuring that you will have average returns. Typically only one or two funds are indicated as being most likely to outperform the others, which means the remaining funds in the L Funds are going to drag down the returns you could have had.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Where should my money be now? #17295

    TS Paul
    Keymaster

    I’ve said plenty on the website, so you don’t need more from me, but I try not to look at the markets over the short term. Days, weeks and months don’t matter in my Thrift Savings Plan – years do.

    As far as how we are doing right now, in the short term (which I know I just said I don’t like to look at) the S Fund is up 5.18% and the I Fund is up 7.23% in the past two weeks. That’s pretty hard to top.

    What do you mean by “more conservative”? I suppose I could eliminate the I Fund, which does tend to be more volatile. Or I could go entirely to the G Fund, which returned 0.08% the last two weeks. But any combination of the I, S, C and F funds has a fair amount of risk over the short term, which is why I don’t invest for the short term.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: latest updates #17273

    TS Paul
    Keymaster

    Yep – that will always be the very top link on the homepage:

    Current Business Cycle Phase and TSP Allocation

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Combining Military and Civilian TSP Accounts #17198

    TS Paul
    Keymaster

    This is not an issue I have dealt with personally (the Thrift Savings Plan didn’t exist during my long-ago military days), but from what I have read there is only one significant factor which would weigh in either direction.

    Advantage: If you combine, you get the convenience of only having to administer one TSP account, so there is that.

    Disadvantage: On the other hand, when it comes time for TSP withdrawals, if you still have two accounts that would likely give you greater flexibility in dealing with the odd restrictions the TSP currently have imposed. Hopefully the TSP will make some changes to that in the near future so it won’t remain a consideration.

    I’m sure that some other readers have looked more closely at combining military and civilian TSP accounts and may have some other thoughts to offer.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: September Update? #17196

    TS Paul
    Keymaster

    I was afraid somebody was going to notice…

    The world has been a very busy place lately and it got to be so late in the month that I decided I would wait until the September economic numbers came in. That way I can get back to discussing those as I traditionally have instead of playing psychologist or babbling on about China and the Fed.

    I will start typing away this weekend and should get the October update out by early next week if no crises arise.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: How to get back into the market #17195

    TS Paul
    Keymaster

    There is no magic to it in my view of investing – if I believe a particular investment is the right place for my money, I put it there right then (under the theory that time in the market is always going to outperform market timing attempts).

    A few years from now, whatever difference might have been caused by buying in over time or fortuitously guessing and buying at exactly the bottom won’t amount to anything of significance in my Thrift Savings Plan balance.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Unpredictable Market #17170

    TS Paul
    Keymaster

    It is always hard to predict what the market is going to do day-to-day and in the short term, but lately it has been especially confounding. I agree – I assumed that when the Fed decided not to raise the rate we would see a market rally. Lots of volatility, but it is really just trading sideways when you look at a weekly chart.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Foolishly moved (inter fund) amount to G on 8/24/15 #17116

    TS Paul
    Keymaster

    I can’t give individual advice, but in general I do tell people not to ever try to time the market (timing the economy is something completely different). This is one of dozens of similar corrections you will see in your investing career. Unless an investor has worked out a secret system more reliable than their “gut”, all the studies show that they are much better off just ignoring corrections and letting their investments ride.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Bargains Outside of the TSP #17115

    TS Paul
    Keymaster

    In my non-TSP accounts I have sizable holdings in both energy stocks and emerging markets. Emerging markets got beat up quite a bit over the last month, but I tend to believe that will see strong growth once we get past the China correction. My energy stocks are probably about even with where I bought them a few months ago at this point, are paying a nice dividend, and I believe that those are so cyclical that an upswing is all but inevitable.

    Your portfolio is a little more international than I have ever been (which doesn’t mean it is wrong, I’ve just been more comfortable forecasting the moves of the US markets), but there is nothing there which I could make an argument against.

    Good luck.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Bargains Outside of the TSP #17090

    TS Paul
    Keymaster

    It is hard to pick just a few, but if I were starting over I would certainly look at the following:
    – I think Apple is undervalued when you look at its P/E ratio. That isn’t a stock which is going to double again in the short term because it is such a huge company, but it has continued to grow and innovate and remains my largest individual stock holding.
    – I like oil companies over the long term – energy stocks are very cyclical and I’m confident that they will swing back up to previous levels over the medium term. Right now I own Conoco Phillips, Chevron and Magellan Midstream Partners LP in that space.
    – in the biotech area, I like Gilead and Celgene.
    – my favorite in the internet space is FaceBook, which doubled for me over the past year.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: C & S Funds #17080

    TS Paul
    Keymaster

    I am strictly forbidden from offering individual advice. In my own Thrift Savings Plan investing I would generally use the G Fund only as a safe haven when I believe the economy is entering a recession, although if I were within a year or two of needing to pull significant money out I would certainly consider putting some of those funds in that very safe vehicle.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP allocation/timing #17079

    TS Paul
    Keymaster

    Seven figures is awesome, you have been doing something right. I won’t give individual advice, but will give you my general feelings on when I move my money. Most of the time I have a strong conviction of which direction things are going to go over the medium and long term (I know I can’t begin to predict short term, so I don’t even try). As a result, if I think a particular fund is going to be the fund over the next year year, I will move there right away and then try not look at it again for a few months so I don’t second guess that decision. On occasion, if I don’t feel strongly I will average in to try to mitigate any big short term volatility – moving perhaps 25% per month until it is all in the fund where I want it to be.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: How Low #17048

    TS Paul
    Keymaster

    This looks like a pretty standard event to me. From my predictions for the Thrift Savings Plan at the beginning of the year in http://www.tspallocation.com/looking-forward-tsp-investing-2015/:

    “As at the beginning of every year, I will confidently predict we will see four or five 5% corrections, and probably a 10% correction at some point (because that happens pretty much every year). With history as a guide, I am convinced the timing of those corrections isn’t predictable, and that the market will recover and move higher in each case within a matter of weeks.”

    Of course in the very next paragraph I talked about the risk posed by a Chinese financial crisis. I don’t think that is where we are at this stage, but I didn’t see Europe causing the damage it did to US markets in 2011 either.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: devaluing the yuan #17033

    TS Paul
    Keymaster

    I will address the Chinese currency devaluation in some detail in the next update (which I hope to get out this weekend). The short answer is that this obviously wasn’t great for any of the Thrift Savings Plan stock funds (C, S or I) in the short term, but I don’t think this will have a significant impact over the medium term, and is very unlikely to have any long term impact. More this weekend when I get some computer time.

    Thanks for being the one to ask the question – everybody else was thinking it. 😉

    -TS

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Waking up and smelling the coffee too late? #16978

    TS Paul
    Keymaster

    If you have a medium to long term time horizon before you will have to withdraw from the Thrift Savings Plan, there is no reason to be in the G or F Funds at this stage in the economic cycle. I can’t give individual advice, but speaking generally I believe that unless it is money which you need in the next two years you will be better off staying invested in the stock funds indicated by where we are in the economic/business cycle.

    Even in the worst case scenario – even if the market crashes and we go into a recession – the odds are overwhelmingly in the favor of the S and C Funds outperforming the F and G Funds over any period greater than two years.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Interest Rates Rising??? #16977

    TS Paul
    Keymaster

    I agree that the TSP F Fund will do badly as rates rise.

    I can’t give individual advice, but would point out that the L2030 Fund is only 6% F Fund, so you have very little exposure to bonds in your portfolio as currently constituted.

    The L2030 has a lot more G Fund (29%) than I would want to have except in a last resort safe haven, but otherwise is not bad. (Note that people talk about the G Fund as if it was a bond fund, but it is not. With a real bond fund, your principal can decline, but with the TSP G Fund, your principal is completely safe.)

    A little more about the TSP L2030 here:

    https://www.tsp.gov/investmentfunds/lfundsheet/fundPerformance_L2030.shtml

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Leaving fed job, but not retiring #16976

    TS Paul
    Keymaster

    You cannot contribute cash out of your pocket into the Thrift Savings Plan. The salient portion from the tsp.gov website is as follows:

    The money that you intend to move into the Thrift Savings Plan must be considered an “eligible rollover distribution” for Federal income tax purposes. You can verify this by checking with the administrator of the plan or IRA from which you are moving the money. You can also consult a tax advisor.

    Traditional: The TSP will accept into the traditional balance of your TSP account both transfers and rollovers of tax-deferred money from traditional IRAs, SIMPLE IRAs, and eligible employer plans.

    Roth: The TSP will accept into the Roth balance of your TSP account only transfers (i.e., direct rollovers) of qualified and non-qualified Roth distributions from Roth 401(k)s, Roth 403(b)s, and Roth 457(b)s. If you don’t already have a Roth balance in your existing TSP account, the transfer will create one.

    The Thrift Savings Plan will not accept Roth rollovers that have already been paid to you and it will not accept transfers or rollovers from Roth IRAs.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Roth TSP Rollover #16975

    TS Paul
    Keymaster

    I have not seen any discussion about plans to make that an option, but it would certainly be worth making the suggestion to the Thrift Savings Plan Board and I’m sure if enough people want to do that they will consider making that an option.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Dave Ramsey’s "diss" on TSP fund performance… #16963

    TS Paul
    Keymaster

    He must have been referring to nonequivalent funds, because when fees are factored in the TSP funds will always beat their non-TSP equivalents.

    On occasion I am attracted to sectors for which there is no TSP equivalent (emerging markets, for example), but never something which I would want to dump the bulk of my retirement investments into. So there is never going to be a time when I’m not satisfied with the choices I have in the TSP for most of my investments.

    All signs are that the Thrift Savings Plan is going to open a window to outside investments in the next year or two, so to the extent that this is an issue at all for some people, that should be eliminated.

    The bigger issue that the TSP has is in the limited withdrawal options which they offer, in my opinion. They are aware of those shortcomings and are working to improve in that area as well.

    I’m still years away from being in a position to move money out of the Thrift Savings Plan, but to the extent that I have looked at the possibility I don’t believe it is at all likely that I will move any money out to an alternative vehicle.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: New to the game… #16957

    TS Paul
    Keymaster

    The two most important bullet points I always give to folks when they are starting out:

    (1) time in the market beats everything: You are in great shape here, starting at 24 you have a long, long investing horizon. As cool as it was two years ago when I got 38.5% return in my Thrift Savings Plan, that pales in comparison to what the 7.8% I got last year will turn into when compounded over the next few decades.

    (2) always seek out tax advantaged vehicles for your investments: TSP and IRAs are like starting with a 20-30% (or more) return on your investment on day one.

    After that, the next most important rule is not to think you are smarter than you are. Over the long term the vast majority of people will not do well trading options, buying penny stocks, playing with commodities futures, doing foreign currency exchange trades, and the like. The institutions win those games. Let the market do the work for you and put most of your money in big boring index funds. Anything else is just your Vegas money.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP Loan #16847

    TS Paul
    Keymaster

    That sounds like a lot of work. I much prefer the relative ease of just investing in the stock market to all that fussing around with real estate. But for people who know what they are doing, there is a lot of money to be made in real estate.

    So assuming you are going to be investing that $10,000 to $20,000 in real estate each year either way, the question boils down to whether you should put it into your Thrift Savings Plan first and then pull it out through a TSP loan to use in your real estate investing.

    I think your plan makes a lot more sense than just saving the money in a non-tax advantaged account and not maxing out your Thrift Savings Plan contributions. The great thing about a TSP loan is that you get to put the money back in and it goes back to compounding tax free until you pull it out. If you stuck the money in a bank account instead of the Thrift Savings Plan, you would miss the opportunity to invest that untaxed money forever.

    Now as to whether or not the real estate investing is a good idea for you, I can’t begin to venture an opinion.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: C & S Funds #16824

    TS Paul
    Keymaster

    That sounds like a perfectly fine Thrift Savings Plan allocation to me. The only part that seems conservative is the 10% in the TSP G Fund, and if that helps you sleep at night it won’t have a major impact on your returns. I don’t expect there to be a huge difference in the returns of the TSP S Fund and C Fund this year as we are somewhere in that space between phases of the business cycle, although you never know how these things will play out.

    Good luck.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Book recommendation regarding taxes and investing #16705

    TS Paul
    Keymaster

    First, just be very aware that I’m not Dan – we recommend each other’s website’s, but not the same guy at all. He’s FERS, I’m TSP.

    I haven’t read any books specific to tax efficient investing – I think I have read enough in broader investing books to feel like I have a good handle on that topic. But a search pulled up this one which appears to be just what you are looking for:

    Tax Efficient Investing by Reto Gallati.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Roller Coaster Market #16700

    TS Paul
    Keymaster

    That won’t be the strategy which I follow in my Thrift Savings Plan – I just don’t think the market’s reaction to interest rates is that predictable and the market may well surge once the band-aid finally gets pulled off.

    I expect plenty of volatility around this event, and there is a good chance we will see a genuine 10%+ correction in there at some point. But I don’t have any way of predicting when those will occur, so I will stick with a longer term strategy and stay in the stock funds for as long as the US economy continues to recover.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Roller Coaster Market #16694

    TS Paul
    Keymaster

    The article Stephan posted in the reply above pretty much nails the reasons I would give for why the market would decline on good news. In the view of many – including the knuckleheads who day trade based on information which effects the market over many months, not days – the strong jobs report makes it more likely that the Fed will raise short term interest rates sooner rather than later.

    At this point, consensus is that the soonest we might see such a rate hike is September (with October more likely), and the market will be up and down daily between then and now. But for the hyperactive traders who feel like they have to trade any news which comes across the wire, this counted as an event worth trading on.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Invest in ROTH IRA vs Pay Mortgage Principal #16559

    TS Paul
    Keymaster

    A back door Roth is for people who make too much money to be eligible to contribute to a Roth IRA (over $129,000/year). What you do instead is fund a non-deductible traditional IRA (you do not get a tax deduction because of your income level) and then immediately convert it to a Roth IRA so that you can take advantage of the tax free gains.

    I plan to write a detailed post on “Back door Roths” at some point, but until then just Google that phrase and there are plenty of sites out there which explain it.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Roth IRA #16558

    TS Paul
    Keymaster

    If you have only been a fed for one year, I’m assuming you are in a relatively low tax bracket and so might well be in a higher bracket when it comes time to withdraw from your retirement accounts. New employees are usually the ones for whom the Roth accounts make the most sense, so certainly something to consider when you look at where you are now and are likely to wind up.

    There are advantages and disadvantages to the non-TSP Roth accounts. On the plus side, you can always pull out the principal which you invested with no penalty and no taxes due (because you already paid the taxes) But then you can’t put that money back in – once it is out, it is out for good. Compare that to a TSP Roth from which you can take a loan (and the only interest you pay is to yourself), and in which you then return the borrowed money so you don’t lose those contribution’s future gains.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: tsp block #16557

    TS Paul
    Keymaster

    The amount you put in and the passage of time for it to compound are the keys building your Thrift Savings Plan balance.

    If you can afford to put more than 10% into your TSP, I certainly think you should (particularly since you can always access that money virtually for free with a TSP loan in a pinch).

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP and outside investments #16556

    TS Paul
    Keymaster

    There is no real difference from a tax standpoint, so the issues I see are (1) you have a much wider variety of options to choose from in your ROTH IRA, and (2) you are going to pay a lower expense ratio in your Thrift Savings Plan fund (0.10% in your VEXAX fund compared to 0.029% in your Thrift Savings Plan). So it just depends on what is more important to you.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP Value #16445

    TS Paul
    Keymaster

    The TSP C Fund is based on the S&P 500. If you are plugging that into a charting webpage or app, you usually use ^GSPC.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP Value #16441

    TS Paul
    Keymaster

    The TSP S Fund (which tracks the Wilshire 4500 Completions Index) was actually down on Friday (-0.27%) and the TSP C Fund was only up 0.25%, so it makes sense that your total Thrift Savings Plan balance was down that little bit. The big news in the markets Friday was all in the tech heavy Nasdaq – those stocks are all in either the S Fund or the C Fund, but their big day didn’t outweigh the drag of the other sectors which didn’t do as well.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: 529 Plans #16440

    TS Paul
    Keymaster

    You definitely could use the business cycle to determine which of those USAA 529 plan portfolios to select at any given time.

    I suspect I would be in the “Very Aggressive” portfolio most of the time and would move through the “Conservative” to “Very Conservative” and finally to “In College” as indicators show the economy is nearing recession.

    I don’t have any experience with 529 plans. Those fees would be very high for an ETF or mutual fund (although that makes some sense as USAA certainly has additional admin burdens with the 529s). Are fees at this level pretty standard for a 529 across the industry?

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: MSN 5 ETFs #16439

    TS Paul
    Keymaster

    Just my opinion, for what it is worth: I don’t think any of the ETFs listed are bad investments if you want to concentrate on one of those specific sectors, but I don’t like that combination for my entire non-TSP portfolio. Buying those ETFs would concentrate the majority of your investments in biotech, tech and banks which seems very limited to me.

    The Biotech and Technology ETFs both look great if you want to invest in those areas, but those are both sectors which are notorious for bubbles and corrections, so it will be a wild ride.

    I’m not a big fan of the Dividend ETF offered in the article. 2.1% is a very low yield and I’d rather go find some higher yielding individual stocks.

    The international fund is fine, but is so diversified it is going to get very average returns. My international investing tends to be market specific based on what is undervalued at any given time rather than just buying a bit of everything in the world.

    And the preferred stock ETF is really just a bank/financial sector ETF.

    Again, probably some very good choices for sector specific investments, but I wouldn’t choose that basket for all of my investments.

    Thanks very much for sharing and starting the discussion.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Invest in ROTH IRA vs Pay Mortgage Principal #16400

    TS Paul
    Keymaster

    When I make that decision for myself I consider the relative returns I will get for my money in both circumstances. I conservatively estimate I can get 8% annually on my investments. If I compare that to the 4.125% (actually lower once I factor in the mortgage interest deduction) which I would essentially receive by eliminating that debt, it has always seemed like a very simple decision.

    In my case I am at the limit for my Thrift Savings Plan contributions and create a back-door Roth every year so I can maximize my tax-advantaged investments.

    Good luck.

    The TSP Allocation Guide www.TSPallocation.com


    TS Paul
    Keymaster

    In answer to your first question, no, the March jobs report by itself won’t make me change my TSP allocation. There are enough variables out there which can impact a single report (weather, oil price drops, etc.) that I will be looking for a longer term trend. And even then, employment numbers are only one of the indicators I consider when making investment decisions in my Thrift Savings Plan.

    The answer to your second question wraps us into the discussion of where we really are in the business cycle right now. It has been such a long slow recovery that most pundits assume we must be out of the recovery phase and into the middle phase of the cycle. I tend to take the view that we are still in the recovery phase (and that at least in part explains why the S Fund is outperforming the C fund), but with the economy reaching full employment and interest rates poised to start up, we are certainly close to that middle “performing” phase.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: USAA Equivalents to Thrift Savings Plan #16331

    TS Paul
    Keymaster

    You can certainly use a USAA brokerage account or buy USAA mutual funds to replicate what you are doing in your Thrift Savings Plan if you want to stay with USAA for convenience.

    If you were going to do mutual funds:

    USSPX tracks the same index as the TSP

    USMIX tracks the same index as the TSP S Fund.

    USIFX appears to be a relatively close match to the TSP I Fund.

    To match the TSP F Fund, you would probably have to buy a combination of USGNX and perhaps USFIX.

    If you open a USAA brokerage account, you can buy any ETFs you like, including those listed on the TSP Fund Equivalents page: http://www.tspallocation.com/mutual-fund-etf-equivalents-tsp-funds/

    If your goal is to buy Vanguard ETFs (which would be my preferred investment vehicle in most cases), you could save on commissions by opening a Vanguard account rather than a USAA account.

    Good luck out there.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Welcome to the TSP Allocation Message Board #16323

    TS Paul
    Keymaster

    I don’t try to time short term dips or corrections. I am sure we will have one sometime in the next couple of months, but I just don’t see a way to predict those movements with any more accuracy than that so I largely ignore them.

    That said, if I have any cash on hand when we do see a quick drop I am quick to put that into the market. The market always recovers quickly, typically within a matter of weeks, so that has been an easy return to predict.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: 2015 TSP Allocation thoughts #16314

    TS Paul
    Keymaster

    I can’t imagine that it will have any measurable effect. As much as we think of the Thrift Savings Plan as being huge, the whole thing is just a drop in the lake compared to the many trillions of dollars sloshing around in the world’s stock markets. The addition of a few new FERS employees a month making a small contribution to the TSP I Fund won’t have any impact at all.

    We did a thought experiment a while back about whether or not we could move the market if every Thrift Savings Plan participant who follows me sold all of their stock funds and moved to the G Fund in the same day. Our conclusion after we played with the numbers was that nobody would even notice, the numbers in the real stock market are just way too big.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Business Cycle Theory #16258

    TS Paul
    Keymaster

    Taxes are the unfortunate part of most investing outside the Thrift Savings Plan.

    As much as I can, I use tax advantaged accounts outside the TSP. I create a “backdoor Roth IRA” every year, and trade more actively in that account than in my regular brokerage account as there are no tax consequences.

    In my regular account, I do move some of my money around to match the current phase, but am slower to sell existing holdings and more likely to buy ETFs for the next phase early with new money. So for example, for about the last year and half I have been buying large cap ETFs with new money I was ready to invest. That lets me (1) avoid paying taxes in the near term when I switch funds, and (2) start averaging into the next phase’s indicated fund so I’m not making the switch all at once in all of my accounts (because there is no bright line so if I ever hit it within a few months that will be pure dumb luck. This blend into the next phase helped me a lot last year when large caps defied the odds and outperformed small caps.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Late to the game #16184

    TS Paul
    Keymaster

    Bear in mind that I am strictly forbidden from giving individual advice and you absolutely should treat this as just one guy’s opinion in a big universe full of other sources of information.

    In that hypothetical situation I would maximize my TSP by contributing the max to take advantage of the opportunity, even if that meant that some of my living expenses had to be paid out of the savings you mentioned. The tax advantages are just too important to pass up.

    It doesn’t sound like you are in that situation and you can max out your TSP and also invest in other vehicles as I do. Each year I create what is called a “backdoor Roth” (just Google those words for lots of instructions). That will get you another $5500 in a tax advantaged account ($6500 if you are 50 or older).

    And then the rest just goes into a regular brokerage account.

    Most of my Roth and other outside account investments go into ETFs which largely mirror the Thrift Savings Plan funds which I am invested in during that phase of the business cycle. The rest go into a mix of different investment strategies I pursue, mostly individual stocks I believe will outperform the market for one reason or another, but also including a bucket of dividend paying stocks.

    Good luck out there.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP and outside investments #16133

    TS Paul
    Keymaster

    There is a page with those Vanguard equivalents to the Thrift Savings Plan funds listed here:

    Mutual Fund and ETF Equivalents to TSP Funds

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Baby-boomers and Bond Interest Rates #16088

    TS Paul
    Keymaster

    It has been so long (1981) and markets were so different the last time we were in a bear market for bonds, I can’t even hazard a guess. A lot of money has already flowed out of the bond market and into equities over the last year or two. I don’t have a sense as to whether a similar or even larger rotation will continue as interest rates start to move up, or if the folks who are going to pull out have already largely done so.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: FERS vs CSRS TSP strategies? #15992

    TS Paul
    Keymaster

    I wrote a bit in the FAQs about my views on retirees/near retirees (http://www.tspallocation.com/faq/#number4)

    I don’t see any real difference in investing strategies between CSRS and FERS participants. There is risk in all of the Thrift Savings Plan funds with the exception of the TSP G Fund, so if I were trying to be more conservative I suppose I would park some money in that. I don’t see my approach as being riskier than a more “diversified” bucket of the other TSP funds – it may be more volatile over a short or medium term period of time, but in the long term it will likely generate higher returns.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: How to lower taxable income? #15991

    TS Paul
    Keymaster

    Roth TSP contributions are made with after-tax money, so that wouldn’t reduce your income for next year. Upping your traditional TSP contributions would do what you are looking for.

    Hopefully some folks who spend more time thinking about tax issues will weigh in with some other ideas as this is definitely not my area of expertise.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Keeping money in TSP after retirement #15990

    TS Paul
    Keymaster

    I like your user name.

    I can’t give individual advice, but I did address some nearing-retirement/post-retirement issues in this FAQ:

    Frequently Asked Questions

    With a ten year horizon before you take the first dollar out of your Thrift Savings Plan, I believe you really have all the options of a new employee. We will go through at least one entire business cycle during that time frame.

    Don’t sweat the month to month returns, those are way too short to be meaningful. Anything shorter than a quarter gets a dismissive shrug.

    Good luck.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Investing in only One fund vs. L-funds??? #15989

    TS Paul
    Keymaster

    I absolutely agree that avoiding the big loss is the most important thing you can do in your Thrift Saving Plan.

    I wrote about my views on folks approaching retirement (I’m not that far away myself) a bit in the FAQs, see:

    Frequently Asked Questions

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Baby-boomers and Bond Interest Rates #15767

    TS Paul
    Keymaster

    I think the long term outlook for interest rates is up, which will be bad for the F Fund’s holdings. If I were guessing, I would say that a year from now interest rates will be higher than they are now, and that trend will continue for at least several years. But I have given up trying to predict when that will come to pass, however, as I started each of the last two years convinced that interest rates were likely to start trending up only to see them stay flat and even decline.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Investing in only One fund vs. L-funds??? #15766

    TS Paul
    Keymaster

    If I had a 30 year horizon and had to pick one fund and couldn’t make any changes, it would be the S Fund because that will likely outperform all others over an extended time. And I would not allocate any of my portfolio to bonds, because at the end of 30 years I would be better off being entirely in the S Fund (even with the occasional crashes) than being in a diversified portfolio.

    But fortunately, I have the option of moving things around to try to avoid the major crashes and scratch out a little bit of extra performance based on economic indicators. It certainly isn’t fool proof, but it has been working fairly well for me.

    With respect to your last question, I looked at the requirements to obtain a Certified Financial Adviser certification out of curiosity a while back. If I could just take the silly exams I would probably do that, but they have all sorts of other nonsense requirements and since I don’t have any plans to make my living giving financial advice, it doesn’t have much appeal.

    Thanks for the kind words.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Rebalancing in the TSP #15708

    TS Paul
    Keymaster

    You can rebalance as often as you like (with some limits applied to multiple changes within the same month), and there is no penalty for doing so.

    See this link for an explanation of the monthly limits:

    https://www.tsp.gov/planparticipation/interfund/IFTs.shtml

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP share prices #15707

    TS Paul
    Keymaster

    10 shares worth $10 each is the same in value as 1 share worth $100. So if you invest $100, it doesn’t matter how many shares you buy.

    Your return is the difference between how much you invested and how much it is worth when you sell it. So if your investment goes up ten percent, it doesn’t matter if you now have 10 shares worth $11 each, or one share worth $110, your return is the same.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Warren Buffet #15706

    TS Paul
    Keymaster

    Buffett is giving excellent advice for people who just don’t want to learn about investing and don’t want to spend any time making decisions. That is a buy and hold forever strategy.

    That’s not how Buffett actually invests any of his money, because he is sophisticated enough to know that strategy will get a very average return.

    I would never advise against doing that, as it is a slow but safe way to build a nest egg. But it isn’t even the best buy and hold forever strategy out there (and he knows that). He has chosen that one because it won’t be excessively volatile. If you follow the numbers, the best buy and hold forever strategy would be to buy a small cap value fund.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Investing in only One fund vs. L-funds??? #15705

    TS Paul
    Keymaster

    That 18 month figure is just the average amount of time it has taken the stock market to recover to its previous level after a significant crash. So sometimes it will be longer, sometimes shorter. But on average, that’s a fair expectation.

    As for where you should invest, I can’t give individual advice and that is why I just talk about what I do. There is a place in my investing for the G and F Funds, but not typically at the same time as I am invested in the S and C Funds. And that is the reason I don’t have any use for the L funds.

    Long term, if I were going to pick just one fund and hold it forever, I would be best off investing in the S Fund. But I think there are indicators which will let me move between funds to be in the best position at different points in the business cycle, which is why I do what I do.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: When to modify allocation to change strategy #15704

    TS Paul
    Keymaster

    Mine mimics my contribution allocation, but there is nothing magic about that. Where your existing balance is allocated makes a much bigger difference to your returns as that is where the vast bulk of your invested funds are.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Why is the market flat and violent short term? #15701

    TS Paul
    Keymaster

    I don’t see any reason to think the markets will see a significant decline anytime in the near future. Anything is possible, but with a strengthening US economy, low interest rates, QE starting in Europe, and low oil prices, things look more to me like they are poised for a strong year economically, which should lead to at least a decent year in the stock market.

    As for recent market volatility, I think you can attribute nearly every move to changes in oil prices. While low oil overall is good for the economy, consumers, and therefore the market, remember that all those energy companies are part of the stock market so when oil prices move dramatically, so will the energy sector stocks.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Business Cycle vs Seasonal Strategy? #15700

    TS Paul
    Keymaster

    Seasonal strategy is a little too short twitch for me – I tend to believe that it is too likely that various short term catalysts can move the market and overcome any seasonal effect.

    Which is not to say that somebody smarter than me can’t successfully employ a seasonal strategy, but I haven’t been satisfied that I can predict things over such a short time period.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Baby-boomers and Bond Interest Rates #15583

    TS Paul
    Keymaster

    With respect to the baby boomers, as long as the US’ GDP continues to grow, it really won’t factor into most of my investing decisions. On the individual stock side, however, it will push me towards health care and related companies.

    One big problem with the near zero interest rates is that it takes away one of the Fed’s main tools if they can’t cut rates during the slowdown phase. That is one of the issues facing the European Central Bank. And yes, if rates are already low that will impact returns from the F Fund both in interest earned as well as gains in the value of bonds held. But it will probably still provide better returns than the G Fund in a declining market.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Mortgage Payoff – Traditional v. Roth #15580

    TS Paul
    Keymaster

    I can always count on DanDan to give my reading comprehension a solid workout. 🙂

    I am still so far from making withdrawals that I am definitely not an expert in those rules. I always go to Dan Jamison and his guide for an explanation on distributions.

    As far as tax consequences go, if you are planning to stop working when you retire, you are probably better off keeping it in the Traditional TSP. If you plan to land a big money private sector job which will move you into a higher tax bracket, the Roth TSP might be the way to go.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP Loan #15364

    TS Paul
    Keymaster

    With respect to the tax issue, it is a wash. Yes, you have paid taxes on the money you pay the loan back with, but you paid zero taxes on the money you borrowed and spent. So in the end it is the same as paying taxes just once.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP Loan #15219

    TS Paul
    Keymaster

    Let’s assume the next year is fairly average and your TSP returns 10 percent. And you are paying back in throughout the year, so the $26,000 isn’t even out for the entire year. All told, you might be forgoing perhaps $1500 in gains. I don’t think that’s going to set you back as much as paying 10% plus on the credit card debt, so I tend to believe this situation would be a good use of a TSP loan.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: I Fund Thoughts #14708

    TS Paul
    Keymaster

    Sorry for the late response – I wrote a long reply a few weeks ago, but apparently something went wrong when I hit submit and it didn’t take for some reason.

    The I Fund is a developed markets fund, so it is largely comprised of European and Japanese stocks. Both Europe and Japan seem to be stuck in neutral right now, with Japan dipping into recession (two straight quarters with negative GDP) and Europe right on the edge.

    I tend to think the Japanese recession will be short and shallow and Abe’s government will be aggressive in trying to get things back on track, but Japan is hamstrung by an odd economy which is very dependent on manufacturing and has an aging, shrinking population which makes it hard to generate growth.

    Europe is just a mess to try to manage. The European Central Bank does not have the ability to be as aggressive as the US Federal Reserve does, and with interest rates already at zero, doesn’t have some of the basic tools to try to move things in the right direction.

    So I feel the I Fund is stuck right now. At some point it is going to start moving and will likely have a decent run-up when that happens, but until then I think it will stay flat and there is some potential for further declines if the economies discussed above continue to flounder.

    I will keep looking at economic news out of Europe and Japan to try to figure out when that move might come, because when it does the I Fund could easily have a 30% year. But right now I feel that I can predict gains in the S Fund and C Fund over the next few quarters, so I won’t move money out of those in hopes the stars will align for the I Fund.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: M2 #14707

    TS Paul
    Keymaster

    Great question. I have done a lousy job of talking about the M2 growth rate as an indicator since I started the website and have glossed over it in the updates. M2 will always expand, the key is the rate at which it is growing. That growth rate is what corresponds so well historically to GDP growth rates, which is one of the things I try to look at.

    I will try to expand on it a bit in the updates in the future.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: To Annuity or Not #14302

    TS Paul
    Keymaster

    I am still far enough away from retirement that I have not really spent any time studying the pros and cons of annuities as compared to remaining in the Thrift Savings Plan.

    That said, my strong sense is that I will stay in the TSP. Annuities are convenient and predictable, but the companies offering them aren’t doing it for free. Unless something goes horribly wrong, I’m not going to be in a position where I need to be worried about exactly how much money is coming in each month or be content to leave nothing behind when I am gone. My focus will be on maximizing a trust to ensure the security of the family I leave behind.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Deflation concerns #14300

    TS Paul
    Keymaster

    A very interesting article and a great primer on deflation.

    I think it is largely an academic argument for the US economy right now. The Fed is appropriately focused on ensuring that we stay on the right side of the inflation/deflation line. The Fed isn’t constrained by as many competing concerns and limitations as their counterparts in Europe (which is trying to manage 28 separate economies) and Japan (which is fairly unique with its shrinking population and limited areas of competitive advantage).

    So right now, no – deflation concerns are not impacting my investing outlook. But that could just be because I’m not smart enough to be appropriately weighting that issue in my calculus.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Fidelity Equivalents to TSP #13916

    TS Paul
    Keymaster

    Thanks for the kind words. I will take a shot at your questions, with all the usual caveats that this is just one guy’s water cooler comments and not at all a recommendation or advice.

    Question #1: I largely mirror in my other accounts what I am doing in my TSP, so most of what I have purchased in the last few years have been small cap funds of one flavor or another. I do own some other things (individual stocks, dividend producers, and a large cap value fund), but the majority is allocated towards the same general area as my TSP.

    Question #2: Fidelity has a partnership with iShares – do you have access to the iShares ETFs?

    Assuming you do, the C Fund equivalent would be IVV, the S Fund rough equivalent would probably be IJR (not an exact match, but same family), the I Fund would be IEFA, and the F Fund would be similar to AGG.

    Question #3: An extra $3000 per month coming in will create some stress as you feel pressured to put that to work. I would mainly set up automatic investments (1) to make it easier so I don’t have to fuss with it each month and (2) to keep me disciplined and prevent me from making emotional decisions based on short term market moves.

    Tax friendly destinations: Google “backdoor Roth IRA” – that will take care of part of it each year. And if you have children look at the educational savings accounts out there. Anything beyond those are outside of my experience. I do wind up with a lot of money flowing to a regular, fully-taxed brokerage account (but that’s one of those good problems to have).

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Consumer Earnings and Spending as Leading Market Indicators #13913

    TS Paul
    Keymaster

    My personal philosophy is ever evolving. 🙂

    I need to make more clear in my writing where I am talking about an indicator which I see as important for figuring out the phase of the business cycle vs indicators which point towards recession risk. I will try to clearly delineate those going forward.

    In my case, employment is really something I look at more for deciding if we are, for example, in the recovery or prosperity phase, rather than if a recession is looming.

    I don’t disagree with Ellis with respect to consumer spending and average hourly wages. I do actually follow consumer spending fairly closely. I had to draw the line somewhere with what I was regularly going to provide data on and discuss, or those monthly updates would get impossibly long. I will give some thought to what is making the cut, and if I streamline the format perhaps one or both may start appearing.

    Thanks very much for the great question – this is exactly the sort of discussion I hope to see on the message board.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Stay the course? #13780

    TS Paul
    Keymaster

    Nothing truer than your last sentence ever written.

    I have written before about why I don’t wait to buy or rebalance on dips in my TSP. The math just doesn’t favor that approach historically over the long term. While that approach would have worked out better this year, in four of the five previous years that “balance” would have cost me a lot of money.

    In my other accounts, when I see a sector appear to be oversold I will sometimes shift assets towards that sector or, more often, dig up some spare cash to try to take advantage of what I think is a short term market inefficiency. I think right now we are seeing a good buying opportunity for both small caps and emerging markets, but we could be in for some rocky weeks before things sort themselves out.

    The divergence between the S Fund and C Fund this year is certainly unusual (although not unique) from a historical perspective. I will write about why I think that has happened, and what impact that will have on my allocations in my next update (which I will try to get out a little earlier this month).

    Good luck out there.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: New Fed: To rollover or not to rollover? #13779

    TS Paul
    Keymaster

    Without knowing more about your existing 401(k) plan, it is hard to say. I know that most of the 401(k) plans I have looked at have such high expenses (and in some cases such poor investment options) relative to the Thrift Savings Plan, that I would roll over without any hesitation at all. On the other hand, if your current fees are low and you are happy with what you can invest in (and there may be some value to having a slightly wider range of options than you get in the TSP), there is no harm in sticking with what you have. Generally though, lower fees win out almost every time.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Individual stock picks – what is your current favorite? #13653

    TS Paul
    Keymaster

    Hi Joey

    I have a brokerage account at Merrill-Lynch in which most of my ETFs and individual stocks are held in either normal or ROTH accounts. I didn’t set out to open an account there, but industry consolidation resulted in several of my separate accounts being combined under that company. It has worked out pretty well for me – they have good service and I get a lot more free trades per month than I will ever use.

    I also have a Vanguard account in which I hold mutual funds in both normal and ROTH accounts. I generally don’t purchase mutual funds anymore, opting for ETFs instead. If you open a Vanguard brokerage account, there are no trading fees for Vanguard ETFs.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: What signifies the switching of funds? #13652

    TS Paul
    Keymaster

    In my view of the world, there are four stages of the business cycle, each of which leads to changes in my allocation. The next change, assuming things go according to script, will be to the TSP C Fund when the economy enters the growth/prosperity phase. Give this post a read for all of the gory details: http://www.tspallocation.com/current-tsp-allocation-business-cycle-phase-update-september-2014/

    Your other questions are vintage DanDan, but I will give them a shot:

    The TSP L2050 Fund has the lowest share price because it was the most recently introduced. The L Fund share prices are set at $10 per share at inception and grow from there. L2050 hasn’t had as much time to grow as the others.

    I’ve seen some recent stories on the issues Kansas is having with its budget and public services. Those stories generally blame the problems on the fiscal policies of the current (GOP dominated) government. I definitely haven’t read enough to have an informed opinion on this, but by all accounts Kansas is not enjoying the same fruits of the recovery as the rest of the country.

    There have similarly been a lot of stories lately about how much better the stock market (and by extension the TSP) has done under Democrats than Republican presidents, which is ironic given the “pro-business” reputation which the Republicans have cultivated. The numbers don’t lie, but correlation does not equal causation, and I am not smart enough to know whether the Democrats just happened to be in office during the recovery phase of the economic cycle each time or if their policies have actually caused the market to outperfom.

    I know there are statistics out there on how the market has performed with different combinations of control of the House, Senate and White House, but I don’t know those off the top of my head. I probably wouldn’t make investing decisions based on those stats however, as I don’t see how they can be dispositive when there is such a limited universe of data since the advent of the modern stock market.

    Lest anyone read any political leanings into my responses, let me just say that I am not a member of either party and despise all politicians equally.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Business cycles #13509

    TS Paul
    Keymaster

    Thanks for the pointer – I hadn’t seen that site before. Very interesting that the author leads with the ISM number as his first indicator. I don’t think I have seen that before (except on the ISM site).

    Give me a day or two to take a closer look and see how this matches up with what I think I know before I give an opinion. But looks like am interesting twist on what I basically do at first glance.

    Thanks, TS

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Percentage of Income to invest #13379

    TS Paul
    Keymaster

    In general I think most people should have a goal of at least maxing out their tax advantaged accounts each year. Obviously that isn’t possible for a lot of people, especially early in their careers.

    Investing just the match won’t make for much of a retirement unless the retiree has a lot of money coming in from another source.

    For what it’s worth, I invest the TSP max ($17,500), create a back-door Roth IRA ($5500), and put many thousands of dollars into my ordinary brokerage account each year. I can do that through a combination of having a relatively high paying job for a federal employee and, more importantly, making those investments my priority.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: career status bonus #13124

    TS Paul
    Keymaster

    I have played around a bit with a calculator and, without knowing your specific situation, agree with David that the CSB appears to be a much better deal for the government than it is for the vast majority of service members.

    Plug your numbers into this and see where your different options would take you:

    http://militarypay.defense.gov/retirement/calc/04_compare.html

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Mutual Funds vs. ETFs #13121

    TS Paul
    Keymaster

    I exclusively buy ETFs now, and most of them are with either Vanguard or iShares.There really are no advantages to mutual funds anymore, and an ETF does not have additional market risk.

    Typically an ETF will have the same or lower fees than a mutual fund from the same company. With a Vanguard brokerage account, you do not pay trading commissions.

    With an ETF you can trade anytime the market is open. With a mutual fund the price is set after the next time the market closes.

    Minimum investment for a Vanguard brokerage account is $3000. Minimum investment for a Vanguard mutual fund varies from $1000 to much higher.

    The only things which is really better about an index mutual fund these days is it is very simple to automatically reinvest your dividends, whereas with the ETF they are typically deposited to your account and you have to manually purchase additional shares. Not a big deal, and certainly not worth paying higher fees for.

    Good luck. -ts

    The TSP Allocation Guide www.TSPallocation.com


    TS Paul
    Keymaster

    I plan to post a bit more detail in the August update, but for anyone interested I have recently put together small collection of BDC/REIT dividend generators. I don’t anticipate these stocks moving up anytime soon, but I think the upcoming interest rate hikes are pretty well priced in. These will be a long term hold with the goal of producing regular income. I don’t pay any commissions on trades, so there is no cost issue for me to put together my own little fund to spread out the risk a bit.

    REITs:

    NLY
    AGNC

    BDCs:

    ARCC
    BKCC
    PSEC
    FSC
    (and I will probably add KCAP before its next ex-dividend date)

    My other favorite individual stocks these days are:

    Apple (AAPL)
    Facebook (FB)
    Sequenom (SQNM)
    Gilead Sciences (GILD)
    Express Scripts (ESRX) – which I just bought this morning

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: career status bonus #13079

    TS Paul
    Keymaster

    If you aren’t already maxing out your TSP, receiving it in multiple installments to allow you to do so over the course of a few years sounds ideal. Or you could buy a Camaro… 😉

    There is probably a mathematical solution to the question. In your situation, what would the decrease in your retirement pay roughly amount to per year and how many years do you have until you plan to retire?

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: What if you die? #13052

    TS Paul
    Keymaster

    I’m not sure how I feel about you planning for my death. A little flattered that you spent some mental energy thinking about it, I suppose, but also a bit frightened.

    I do hope to go out a bit more elegantly than being flattened by a beer truck, but I see where you are going with this. Right now I’m in my mid-40’s, and in excellent health, so I shouldn’t go naturally anytime soon.

    I don’t anticipate stopping the monthly updates for the foreseeable future unless my agency capriciously changes its mind and tells me that anonymous hobby writing is no longer acceptable.

    Long term, my hope is really that the site will continue to grow and eventually some readers will emerge from the community with a similar investing philosophy and an interest in contributing their own writing to the site. I would be delighted to share the update duties at some point, and would set things up so that they would just take over if anything unfortunate ever happened to me. (I’ve logged your IP address, so if I do coincidentally get hit by a beer truck in the next year or two, you had better have a good alibi ready.)

    I think just about anyone who reads this page a couple of times and perhaps checks out a few of the books on the business cycle on the Recommended Reading page would be able to make educated decisions about where we are in the cycle by following basic news on the economy. But I hope that this community will continue to grow so that there will always a place to come to discuss our thoughts on that subject and bounce ideas off each other.

    With respect to the non-TSP index fund recommendations, you can find a page called ‘Mutual Fund and ETF Equivalents to TSP Funds’ under the ‘Resources’ tab above. The direct link is: http://www.tspallocation.com/mutual-fund-etf-equivalents-tsp-funds/

    VB is good, and I own a lot of that ETF. I also hold VBR, which is the small-cap value index (which tends to do better than the core and growth versions over the long run).

    Good luck and thanks for reading. -ts

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: career status bonus #13040

    TS Paul
    Keymaster

    I have not done any research into the pros and cons of the career status bonus, so I don’t feel qualified to have an opinion and will defer to your military brethren.

    I am curious about one thing: would you be able to deposit the entire $30,000, or would your annual contribution limit apply?

    The TSP Allocation Guide www.TSPallocation.com


    TS Paul
    Keymaster

    As always DanDan, it is an adventure following your journey through personal finance. 😉

    I will pick and choose a few threads to reply to:

    – I think you are a little off when you say that they only match your traditional. From the TSP.gov website:

    our Agency Matching Contributions are based on the total amount of money (traditional and Roth) that you contribute each pay period. All agency contributions are deposited into your traditional balance.

    – why do I like Vanguard? Typically in the past they had the lowest fees and expenses. In the last year or so some of the other big fund companies have come down considerably to try to compete. With a Vanguard brokerage account, no commissions are charged for trades involving Vanguard ETFs (which are really all you need).

    – I don’t think there is any downside to investing in both traditional and Roth TSPs if that is what you want to do.

    Thanks for playing, -ts

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSPallocation.com is Number One (with a bullet)! #12925

    TS Paul
    Keymaster

    Check out FAQ #7 for a discussion of what the economic indicators looked like in the run up to the last bear market: http://www.tspallocation.com/faq/#number7

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Tipping point, Price per share….part deux!!! #12802

    TS Paul
    Keymaster

    Hi Dan, welcome back.

    The basic question I got out of today’s rant was:

    – does number of shares impact return?

    The number of shares you own in a fund does not impact your rate of return. The rate of return is based on the hypothetical $350 you invested above, not on the number of shares you purchased with that money.

    If Fund A goes up 10% and Fund B goes up 20%, it doesn’t matter how many shares of each you own based on that $350 investment. With Fund A you have made $35 (a return of 10%), and with Fund B you have made $70 (a return of 20%).

    So at the end of the day, whichever fund you believe is going to perform best is where you want your money, without regard for how many shares they arbitrarily assign to represent that money.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: other books on business cycle #12775

    TS Paul
    Keymaster

    Two other good books on the business cycle on my shelf are:

    Ahead of the Curve: A Commonsense Guide to Forecasting Business and Market Cycles by Joseph H. Ellis

    Beating the Business Cycle: How to Predict and Profit From Turning Points in the Economy by Lakshman Achuthan

    I had really meant to add those to the Recommended Reading page and I will do that now with a bit more a description of each.

    I am not aware of any online classes on the subject, but if you find one please post a link to it here as I would be very interested in seeing it.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: school debt #12705

    TS Paul
    Keymaster

    It probably took me about 15 years to completely pay them off, but that was because I put my loans into the extended payment option. I did that not because I was having any trouble repaying them, but because my agency’s Student Loan Repayment Program was paying for about half of them, but only over the course of many years.

    Typically I believe the math weighs in favor of maxing out your retirement accounts before you consider paying ahead on student loans. Between the student loan interest tax deduction for lower income earners and the potential for various programs to either forgive or pay off some of the loans, I think it is usually pretty rare to be in a position where throwing a few thousand dollars at your loan balance makes more sense than maxing out your Thrift Savings Plan or funding an IRA.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Taper #12665

    TS Paul
    Keymaster

    That is the trillion dollar question, isn’t it?

    With respect to the economy, even with the end of quantitative easing, I believe interest rates will remain relatively low as the Fed rate will be increased very cautiously. The Fed’s job is to try to keep the economy growing, so I don’t believe they will do anything drastic and risk contraction.

    The stock market will be very sensitive to those interest rate hikes as they come, probably reacting very negatively each time rate hikes are announced. Higher interest rates will attract some investors to bonds, potentially steering money away from equities (although more likely some of the record amounts of cash currently sitting on the sidelines will go towards bonds). Higher interest rates also make it more expensive for investors (and investment banks) to buy stocks with borrowed money, potentially cutting demand (although likely not to an extent which will have a meaningful impact on stock prices).

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: When to modify allocation to change strategy #12643

    TS Paul
    Keymaster

    I can’t give any sort of individual advice, but I can tell you how I approach allocation changes in my own accounts:

    If I am reasonably convinced that the fund or stock which I am buying is trending up, I will not “average in” by buying at different times. Instead I put whatever funds I am investing to work right away.

    In contrast, if I am buying a stock or fund which is beaten up and possibly still falling, I will use the dollar-cost average strategy and invest fixed amounts over time. That results in buying more shares when the price is lower and less when it is more expensive, and results in a lower total average cost per share. So at the tail end of a recession, for example, I might move a fixed percentage from the F Fund to the S Fund each week or month to hedge against the market moving lower.

    I hope that helps a little. -ts

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: How to calculate TSP performance YTD? #12614

    TS Paul
    Keymaster

    With the business cycle theory of investing, I don’t worry about daily returns and generally only care about anything shorter than a month out of curiosity. But for the website updates I do feel like I need to provide some hard numbers, so thankfully there are some other sites which provide those.

    I typically get my Year-to-Date and other date range numbers from TSPcenter.com.

    The nice folks at TSP Center are very into technical analysis so they worry about what the funds do every day and have some handy tools as a result. They also generally have a very friendly, supportive forum with very few of the keyboard bullies you so often find online. When I have a spare minute in the elevator I sometimes browse to see what folks are talking about there (mostly Bollinger bands, moving averages, and the like), but usually flee in a panic when I see how often they are trading.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Are we possibly in the mid/growth phase? #12559

    TS Paul
    Keymaster

    That is such a great question that I will address it in the monthly update which I should hopefully get up by tomorrow.

    The short answer is that I do believe we are still in the early/recovery phase. But this recovery is certainly different because of the Fed’s aggressiveness, so the business cycle phase may not always match up exactly as we would expect with the stock market.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Near retirement #12409

    TS Paul
    Keymaster

    This is definitely not my area of expertise, but my understanding is the Social Security earnings limit is based solely on earnings from wages or self-employment. All other forms of income, including annuities like the pension you mention above, aren’t counted.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: maxing out tsp investments #12408

    TS Paul
    Keymaster

    Sorry, I don’t have anyone I can recommend. Surely one of the hundreds of folks who browse this page each week must have one they are happy with and will post their contact info for you though.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: maxing out tsp investments #12407

    TS Paul
    Keymaster

    Sorry, I don’t have anyone I can recommend. Surely one of the hundreds of folks who browse this page each week must have one they are happy with and will post their contact info for you though.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Market timing #12331

    TS Paul
    Keymaster

    I actually use Yahoo! Finance for most of my stock and index charts (including the ones which I put on this website).

    I don’t put much value in technical indicators. But if I wanted to look at Simple Moving Averages (SMA) I would go to the following page which is the S&P 500 chart. Above the chart there is a drop-down titled Technical Indicators where you can select Simple Moving Averages and chose any time periods you like.

    http://finance.yahoo.com/echarts?s=gspc

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: maxing out tsp investments #12330

    TS Paul
    Keymaster

    On the first issue, you may be confusing IRAs with 401Ks. In addition to your Thrift Savings Plan contributions, you may also contribute up to $5,500 to either a Traditional or Roth IRA each year (although depending on your income level, those contributions may not be tax deductible and/or you may have to jump through a few hoops).

    Assuming you currently have both stock and bond funds, which should be in a tax-advantaged account? It boils down to how far you are from retirement. Studies show that typically if you are 15 years or more from retiring, it might make more sense to hold stocks in your IRA. Whereas if you are relatively close to retiring, you are probably better off putting the bond funds in your IRA.

    Conventional wisdom is investors should hold bonds (except for municipal bonds) in tax-protected IRAs and stocks in their taxable accounts. Intuitively, that makes sense because the interest paid on bonds is taxed annually as ordinary income. Meanwhile, stocks typically generate much less income, and that dividend income is taxed at a much lower rate – generally 15%. Long-term capital gains from stocks typically will be taxed at that 15% rate as well.

    However, stocks generally produce higher returns than bonds, and due to the magic of compounding, the differences in performance really add up over an extended period time. As a result, the return from stocks can generate a much higher tax burden than bonds over the long term.

    All the typical disclaimers apply – I am not a tax expert (not even close), so this is just my understanding based on the limited research I have done on this subject.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: DCA vs. VA vs. Cash for Crash #12327

    TS Paul
    Keymaster

    When I am making investment decisions in my own accounts, if I am reasonably convinced that the fund or stock which I am buying is trending up I will not “average in” by buying at different times. Instead I put whatever funds I am investing to work right away.

    In contrast, if I am buying a stock or fund which is beaten up and possibly still falling, I will use the dollar-cost average strategy and invest fixed amounts over time. So at the tail end of a recession, for example, I might move a fixed percentage from the TSP F Fund to the TSP S Fund each week or month to hedge against the market moving lower.

    The only problem with waiting for a correction is one might not come along for several months and you could miss some significant gains during that time. In a situation where I feel that the market is poised for an imminent correction (such as earlier this year when we hadn’t seen one for a long time and the financial media was working the public into a frenzy), I might be inclined to wait until that happened. But with my luck, I would miss a 10% gain while waiting for a 5% decline.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: maxing out tsp investments #11970

    TS Paul
    Keymaster

    I suppose that everyone’s situation is a little bit different, but I have been a big believer in maxing out tax advantaged accounts – whether that is your Thrift Savings Plan, or a traditional or Roth IRA.

    I can’t overstate the advantage of the tax advantaged accounts – either deferring taxes for decades into the future in the TSP or a traditional IRA, or having gains grow tax free forever in a Roth. But once a year is past, the opportunity to make those contributions is gone forever so I believe it is best to take full advantage as early as you can.

    Until I was maxed out in both my TSP and IRAs, I did not have any other types of investments. The reason for that is there was nothing I was saving for during that period besides the down payment for a house. (During that period, I only needed to put 5% down, so that was not going to be a great deal of money anyhow.)

    If your goal is to save for a house, remember that you can tap into those tax advantaged accounts fairly easily. You can borrow from your TSP and pay the interest to yourself, or you can make withdrawals from IRAs for the purchase of a home. (Rules for withdrawals vary depending on the type of IRA and whether or not you are a first time home buyer – a quick Google search will get you all those details).

    Thanks for the great question, and good luck.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: BDC's #11938

    TS Paul
    Keymaster

    My sense is the investors who are fearing the drop when they are removed from the indices have sold. But what I frankly don’t know is how much the selling which occurs automatically by the funds tracking the indices will cause them to fall. 8% of all outstanding BDC shares are held by those funds, so that could be a pretty major hit (and a pretty fantastic buying opportunity if we can pick the bottom). My inclination is to wait and see within my own account – I don’t think I will be a buyer until the reconstituted indices are pushed out and the selling is in full swings.

    It sounds like you have already done a lot of research on this subject. For the folks who are trying to catch up, here are a few articles on the subject:

    http://blogs.barrons.com/focusonfunds/2014/03/04/russell-sets-terms-for-booting-bdcs-should-you-buy-the-dip/2/

    http://seekingalpha.com/article/2171413-bdc-pricing-and-the-russell-indices-part-1

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Advantage to being in both large and small caps? #11886

    TS Paul
    Keymaster

    I started this project for noobs, so don’t ever be shy about asking a question.

    Large caps and small caps tend to move in unison, with small caps moving up more on the up days, and down more on the down days. For that reason, I don’t think you can hedge with the TSP C Fund. In this phase of the economic cycle we see more up days than down, and the overall result has been that the small caps (TSP S Fund) have outperformed the large caps (TSP C Fund) by 28% over the past three years.

    So far this year the C Fund has outperformed the S Fund, but that is over a pretty short time period. My expectation is that the S Fund’s performance will surpass the C Fund over the long term, but there are no guarantees and this time could be the exception.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Thoughts on seasonal investing? #11820

    TS Paul
    Keymaster

    Great question, and thanks very much for posting it. As soon as I saw the title I knew that you were someone who has been reading the tspcenter message board.

    Within the TSP I don’t consider seasonality at all. I’ve looked at all the patterns which people have found and read all the books like The Little Book of Stock Market Cycles. I haven’t found any which I am willing to follow with my TSP, either because (1) I don’t think the statistical sample backs up the pattern (either too short so no conclusion can be drawn, skewed by one or two extreme years, or ridiculously long so it is drawing conclusions based on a stock market, financial system and economy which no longer exist), or (2) because generally as soon as a pattern can be discerned it becomes useless as the quants plug it into their algorithms and trade it way before I can. I think you can very legitimately predict trading volume, but not direction or money flows.

    The only exception for me recently has been playing the Santa Claus Effect. Outside the TSP I have tended to load up a little around Thanksgiving and hold that until at least the first week in January. This one makes sense to me because there are pretty solid money flow and psychological reasons for it (in my opinion). This period sees end of year bonuses, people maxing out their 401Ks and IRAs before the end of the year, people funding new IRAs as soon as the clock strikes midnight on New Year’s Eve, and the rash of people getting a fresh start and making investments as part of the new year. All of that money has to go somewhere, and generally it results in the market going up. Because it is a well known effect, people and institutions try to front-run it, so it starts earlier every year and I believe it will eventually fade to nothing. (Last year it was awesome from the end of the shutdown until that ugly first week in January.)

    I suspect that some of my skepticism also stems from my investing temperament – I am basically a buy-and-hold investor, not a trader. Occasionally it is entertaining to try to outsmart the market with something small, but on the whole I am content to let general trends and compounding do their thing until the occasional recession comes around and I move to a safe haven.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Near retirement #11679

    TS Paul
    Keymaster

    I imagine that would lead to a pretty huge tax hit. Without knowing more about your situation, by the time you factor in salary for that year, whatever annuity comes in, plus any other income, you could wind up in a much higher tax bracket than normal. While I threw that in there as an example because I know some people do so, I believe I will be inclined to carefully craft my distributions to try to minimize the taxes I pay on them, and won’t do any sort of lump distribution at retirement.

    Unless you have an oddly high interest rate for some reason, keeping that $130,000 invested is almost certainly the better solution mathematically when you factor in the mortgage deduction and the return you can expect on the invested funds.

    By the way, congratulations on that hefty Thrift Savings Plan balance. If the next 26 months are good, you could top $1 million in there before you go. You have definitely maximized your opportunity with the TSP and are a great example for newer Feds to try to emulate.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP share prices / return rate #11642

    TS Paul
    Keymaster

    Hi Dan

    Just one flaw in your math – you are trying to use a fund’s return to find its return.

    To determine the return of a fund over any given length of time, you divide the value of that fund at the beginning of the time period by the value at the end of the time period. The 38% which the TSP S Fund returned last year could be obtained by doing that math with the value of a single share, any set number of shares, or the total value of all the shares.

    The difference in value of between shares of different TSP funds does not have any impact on returns. Let’s do a simple example:

    On January 1, you have $100 invested in each Fund A and Fund B.

    Fund A is worth $1 per share, so you own 100 shares.

    Fund B is worth $10 per share, so you own 10 shares.

    On December 31, Fund A is worth $1.50 per share, so your return is 1.00 / 1.50 = 50%, and the total value in your account is $150.

    On December 31, Fund B is worth $14.00 per share, so your return is 10 / 14 = 40%, and the total value in your account is $140.

    So even though Fund B went up $4 per share while Fund A went up only $0.50, Fund A has a higher return.

    Hope that makes some sense. Good luck.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: TSP Fund Fees #11304

    TS Paul
    Keymaster

    In 2013:

    G: 0.027%
    F: 0.039%
    C: 0.029%
    S: 0.026%
    I: 0.029%

    This means that expenses charged to each TSP account in 2013 were approximately 26 to 39 cents per $1,000 invested.

    You can find those at: https://www.tsp.gov/investmentfunds/fundsoverview/comparisonMatrix.shtml

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Traditional or Roth #11251

    TS Paul
    Keymaster

    That is such a great question I just wound up writing an entire post about it which you can find here:

    Traditional TSP vs. Roth TSP

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Interfund Transfer and Contribution Allocation #11224

    TS Paul
    Keymaster

    Exactly – to have everything in the TSP S Fund you would need to conduct both an interfund transfer to move all of your existing balances to the S Fund, and also change your contribution allocation so all of your future contributions go the S Fund as well.

    Good luck, TS

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Near retirement #11109

    TS Paul
    Keymaster

    I love your enthusiasm. And my hope on this forum is to create a group of TSP investors who are looking at the various indicators, sharing ideas, and trying to divine the phase of the business cycle together.

    VB has an annual distribution, so that December distribution is the only one. With Vanguard ETFs you can take a look at the distributions on their webpage, here is VB’s:

    https://personal.vanguard.com/us/funds/snapshot?FundId=0969&FundIntExt=INT#tab=4

    You should be able to attach your Word file to your reply on the message board – there should be an Attachments section between where you enter the text and the submit button. The message board software is a little buggy, so if you don’t have any luck with that please just email it to me and I’ll upload it to the server and give you a link to put in your reply.

    Thanks very much. -ts

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Near retirement #11076

    TS Paul
    Keymaster

    Thanks very much for the kind words, although I take them with a grain of salt. Everybody likes me when the market is up. 😉

    With respect to how your small cap ETF (VB)’s dividends work – yes, you will receive a distribution which is deposited as cash into your brokerage account. VB pays an annual dividend in the last week of December. The last two years it has been $1.48 and $1.42 per share. So your hypothetical $100,000 balance would have resulted in about a $1300 distribution last year.

    Once you see that cash balance in your brokerage account, you can either reinvest the money or transfer it out to your bank account.

    Hope that answered your question. Good luck.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Diversification #10947

    TS Paul
    Keymaster

    Hi Robbie

    Great question, and sorry for the slow response – I have been pressed for time and getting the update out took up the little time I had to devote to the website lately.

    My belief is that at any given phase of the business cycle, there will typically only be one fund indicated (ignoring the TSP I Fund for this purpose).

    Diversification might make sense in a truly passive investing strategy, although even if you never make any adjustments at all, being all in stocks will result in a higher return over the long term than being in a mixed portfolio. The idea behind being diversified is it prevents a large loss when the stock market goes into recession. This works because bonds move in the opposite direction when stocks go down, so you wind up not losing as much overall. That sounds like a positive, but the same dynamic which keeps you from losing the maximum on the downside, also keeps you from going up to as high as you can go when the market goes up.

    Because I believe I can safely be out of the market before a significant recession based crash by monitoring where we are in the economic cycle, diversification doesn’t make sense in my circumstance.

    Let’s take your 30% in the G Fund, for example. If the market had tanked last year, that 30% would have been safe and earned 1.5% or whatever the G Fund returned. That would have protected that 30% from whatever decline the market suffered. But because the market went up about 38%, you missed out on about 36% worth of returns on that portion of your TSP. For every $100,000 you had in G Fund, that would have been $36,000 in missed gains. That is pretty significant.

    Financial advisers preach diversification because they are afraid they will lose all their clients when the market declines unless they can point to a portion of their holdings which went up during the same period. In their view, average is better, even if they understand their clients would be better off over the long term not “protecting” a large portion of their funds. They have learned that the inaccurate “slow but steady” and “conservative” themes sell better with a fearful majority of investors.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: What to do with Index fund gains? #10944

    TS Paul
    Keymaster

    I almost exclusively use Vanguard because of their very low fees (although a few other companies have finally started to come down to match Vanguard).

    The only exception is when there is a sector which I am interested in for which Vanguard does not have a fund. Right now, for example, I have some money in WMCR which tracks the Wilshire Micro Cap index.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Crimea, Russia and business cycle #10754

    TS Paul
    Keymaster

    Thanks for starting this thread. That is one of the topics I am planning to address if I ever get this month’s update out.

    While new surprises from that region will certainly cause some market volatility, I don’t think it is likely to impact the business cycle as long as it is contained to a conflict between Ukraine and Russia. The only way I could see the US business cycle being altered is if a shooting war breaks out which draws in other countries in Western Europe, tanking the European economy and pulling ours down with it. I think the odds of that are extremely low and there would be a lot of intermediate steps between here and there.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: What to do with Index fund gains? #10730

    TS Paul
    Keymaster

    Hi Tracy

    Typically I will just reinvest dividends in the same ETF if I feel that it is still the right investment for the phase of the business cycle at that time.

    Occasionally an individual stock might be more attractive to me at that particular moment and I’ll sweep all my available cash into that, but that’s pretty rare. The vast majority of my investments are in index funds.

    Thanks for the question.

    Best, Paul

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Weather impacts on economy #10532

    TS Paul
    Keymaster

    It is interesting that the impact on crops really hasn’t gotten much play in the press yet. I’m inclined to believe it is just too complicated an issue with way too many variables, so most “financial” writers will stick to the easy stories they have written a dozen times before instead of treading new ground. I still lean towards it having a negligible impact on our Thrift Savings Plan balances, but it will be interesting to see how the financial press reacts if food prices start spiking up.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: stock market crash #10507

    TS Paul
    Keymaster

    Paul Farrell over at MarketWatch isn’t an idiot, although his consistently wrong monthly predictions regarding market crashes might make you think so. He and MarketWatch are laughing all the way to the bank because those are the headlines which attract eyeballs, and more eyeballs translates to more ad revenue.

    Those articles are almost all “link bait”, meaning they are written for the purpose of attracting attention, which leads to people linking to them from other articles, blogs, twitter, wherever. The end result is more traffic to the original article, which results in ad revenue, more followers, etc.

    I could easily set a single day record on this website for visitors, page views, ad revenue, and social shares if I shot out an update linking to a post in which I announced I believed a crash was imminent and I was changing my TSP allocation. (There are some other TSP websites which do pretty much just that every couple of months.)

    My prediction is that over the course of the rest of this year we will have two more corrections between 5% and 10%, and one correction between 10% and 15%. That’s not based on anything related to bubbles, the economy, geopolitics or Obamacare – it’s just that is roughly what happens in an average year. We can’t predict when they are going to happen, so we don’t bother trying and we ride through them without breaking a sweat because the market is almost always back to breakeven within two months (and sometimes within just a few days).

    Real crashes (30%+ declines) happen for very specific reasons, nearly always because the economy has entered a recession. That’s exactly why we look at all those economic indicators each month – so we can see a recession coming and be safely out of the stock funds when it hits. Right now, in my opinion none of the indicators are pointing in that direction so I think it is very unlikely we will see something like that this year.

    Thanks very much for the question and good luck out there. Please don’t let me have the last word on this – if anyone else has an opinion on this topic please share.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Near retirement #10054

    TS Paul
    Keymaster

    Sorry, I was being lazy when I referred to the pension as my FERS.

    That’s an interesting idea to transfer money out and then back in. I have to admit that I am still so far away from retirement that I haven’t spent any time looking at the rules on moving in and out.

    My sense has always been that I will keep everything in the TSP after I retire, just because it is such a good deal with unmatchable low expenses. And I will still have the ability to trade in and out of the various funds to match the business cycle phase. I also expect that I will have a pretty sizable balance in my non-TSP investments, so I will feel that I have plenty of options and flexibility.

    But I am intrigued by the notion you present and will give some thought to the possibilities. And am very interested in hearing from anyone else who has some knowledge or experience in doing something similar.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Near retirement #10050

    TS Paul
    Keymaster

    Someone who plans to be using a portion of the money from their TSP in the foreseeable future (or 401(k) or IRA or wherever they are keeping it) wants to make sure there isn’t going to be a major downturn and the money they are counting on will be there when they need it. So when I think about how far out I would feel I needed to protect that portion of my funds, I base that decision on how long it takes to get back to break-even from a downturn, correction or even a bear market.

    Typically when we see a downturn of 5-10% like the most recent one, the market is back to break-even within two months.

    Even when we see a major “crash” of 30% or more, the market has returned to break-even on average within 14 months.

    So as I plan for that approach to retirement, I will only consider “protecting” funds which I anticipate using in the next 18 months. Because I anticipate withdrawing from my TSP in small amounts over a very long period, I will likely not put anything into a safe fund as I approach that date unless it is indicated by where we are in the economic cycle.

    As I discussed above, if I plan to take out a large disbursement upon retirement I would certainly consider putting at least a portion of that into the TSP G Fund 18 months before I intended to pull it out.

    With respect to the notion of having several years of living expenses sitting in the TSP G Fund, I can’t think of a scenario where that would make any sense for me. My living expenses will easily be covered by FERS and Social Security, so that money would be in whichever fund is indicated by where we are in the business cycle.

    As for having equity and income buckets, my belief is that at any given phase of the business cycle, there will typically only be one fund indicated (ignoring the TSP I Fund for this purpose). So if the G or F Fund is supposed to be the “income” bucket, I don’t see myself doing that.

    When I think of income buckets, I tend to think of a basket of dividend producing stocks which generate income in the form of dividends. That is certainly worth considering and I have a few individual stocks which I own just because they have a high dividend payout and generate a few thousand dollars in income every year in addition to whatever value gain they have.

    All that said, as you approach retirement if being 100% in the stock market is causing you stress and you can afford it, there is something to be said for sleeping well at night if being a little more diversified is going to help with that. I recognize that I may have a higher tolerance for volatility and riding out downturns than a lot of folks do.

    Hope that helps a little and good luck

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: How to compare index funds? #9785

    TS Paul
    Keymaster

    If I’m understanding the question correctly, my understanding is that two mutual funds tracking the same index will hold the exact same stocks and in the same proportion. Those stocks will have the same value whether they are held by the Vanguard fund or another fund – there is no premium or discount based on which company creates the fund. The difference in price between shares of one index fund and other simply reflects how the different companies have chosen to break up ownership interests. But at the end of the day, owning $35,000 of the Vanguard fund will result in your owning the exact same amount of the underlying securities as $35,000 invested in any other fund tracking the same index, whether you own 1 share worth $35k or 35,000 shares worth $1 each.

    So all else being equal, saving .55% in expenses annually would save about $192 in expenses and I would go with the Vanguard fund.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Submitting Info? #9776

    TS Paul
    Keymaster

    That is one of those things which is never really quite defined. I generally look at it as being from whatever the most recent high was before the decline. If anyone knows if there is a more precise definition, please share.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: January barometer #9772

    TS Paul
    Keymaster

    Or, as Dan Greenhaus at BTIG explains, as goes any month, so goes the year:

    It is commonly asserted that January is an important leading indicator for full year performance. In 2008 for instance, January was down by 6.12% and the full year ended up being down 38.5% inclusive of said January. But, a quick look at other months shows the exact same trend. Taken at face value, the belief that January is an important indicator of the twelve month period imparts greater importance on January than any other month and other twelve month periods. However, when doing the same analysis on other months, we learn that:

    When February is down, the 12 month return inclusive of that February is 2.0%. When February is up, the S&P 500 returns 12.53%
    When March is down, the 12 month return inclusive of that March is 3.5%. When March is up, the S&P 500 returns 11.46%
    When April is down, the 12 month return inclusive of that April is -0.23%. When April is up, the S&P 500 returns 12.87%
    When May is down, the 12 month return inclusive of that May is 4.39%. When May is up, the S&P 500 returns 11.61%

    We could go on but you get the point. As goes any month? So goes that twelve month period.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: January barometer #9771

    TS Paul
    Keymaster

    Great chart, xGIOx, thanks for sharing that.

    There are lies, damned lies, and statistics. And the January barometer is accurately described below as a “Neanderthal statistic.” The results are about as correlated as the myth about the winner of the Super Bowl showing the direction of the market, so I pay it absolutely no attention at all.

    CNBC’s Alex Rosenberg did a much better job of breaking it down than I can, so with credit to that source:

    Proponents of the barometer point to the fact that over the past 35 years, the S&P 500 has followed January’s direction 71 percent of the time. However, this statistic is skewed by the fact that it includes January in that full-year performance.

    That means that in years like 1987, when the market rose 13 percent in January but finished the year just 2 percent in the green, listening to the January barometer would have yielded a loss of some 10 percent—and yet this year is still counted as a success for the barometer.

    Still, even if we merely compare January’s performance to the path that stocks beat over the following 11 months, January still appears to predict the S&P’s path 66 percent of the time. The problem is that it is much better at “predicting” winning years than losing ones.

    Going back to 1979, the S&P rose in 23 out of 35 Januarys. Over the next 11 months, the market consequently rose in 19 of those 23 years that were kicked off by winning Januarys—meaning that a positive January has successfully predicted a winning February-through-December 83 percent of the time.

    But in the 12 years when the market fell in January, the market only followed along in four years. That’s just a 33 percent success rate.

    The reason that positive Januarys prove to be a great barometer, and negative Januarys a terrible one, is the same reason that the “January barometer” appears to exist in the first place: Stocks rise.

    “It’s Neanderthal statistics,” said Mark Dow, a former hedge fund manager who currently writes at the Behavioral Macro blog. “You could say rain in Scotland predicts the money supply in the U.S., but that’s just because rain always falls and the money supply always grows. Well, stock markets tend to go up.”

    “It’s one of those rules that traders throw around because we have to have simplicity in the world we live in—otherwise we just have too much information to handle,” Dow said. “And it’s a bull—- rule.”

    Nicholas Colas, the chief market strategist at ConvergEx Group, is not quite so blunt.

    “I’m very respectful of market tradition and market history and I get why January sets the tone for the year,” Colas said on Thursday’s episode of “Futures Now.”

    He says there is a fundamental rationale behind it, which is that “if the year starts off well, then people are more happy to allocate money to risk assets, and the flow continues throughout the rule.”

    But he adds that even if there is sense behind the rule, traders would instantly take advantage of it, which would eviscerate any advantage gained by following it.

    “I get why it holds people’s attention,” Colas said. “But I’m always hesitant that anything has real value when it’s such an easily arbitrageable event.”

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Mutual Fund and ETF Equivalents to TSP Funds #9464

    TS Paul
    Keymaster

    I realize that I didn’t answer your questions very specifically with respect to which funds I would use. I have a list of Vanguard mutual funds and ETFs for each of the TSP funds here: http://www.tspallocation.com/mutual-fund-etf-equivalents-tsp-funds/

    The only TSP fund you really can’t match is the TSP G Fund, so if we were in a rising rate environment (as we are now) and I wanted to be out of stocks but also stay away from bond funds like the TSP F Fund, I would have it go to cash. (My brokerage sweeps cash into a very short term debt fund which doesn’t pay much but isn’t impacted by rising rates).

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: S Fund Tracking #9463

    TS Paul
    Keymaster

    The Wilshire 4500 (^W4500) is the index you should track if you are keeping a ticker screen as that is the closest index out there. You can really use any of the small cap indexes to get an approximation – the Russell 2000 (^RUT) is frequently referred to in reporting as indicative of small cap performance and it will track very closely to the W4500 because they are both cap weighted and so most of their holdings wind up being the same.

    I have a page listing mutual fund and ETF equivalents for the various TSP funds here: http://www.tspallocation.com/mutual-fund-etf-equivalents-tsp-funds/

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: 2008 Financial Crisis #9462

    TS Paul
    Keymaster

    Hi Bob

    Great question. I am resolute about not claiming unverified returns from before I started the website, so rather than telling you what I did back then, let’s look at the indicators someone more hypothetical following this strategy would have been looking at.

    I generally use http://www.tradingeconomics.com to look back at historical economic data. It is a great resource.

    The stock market – we saw the first sizable dip in about December 2007, followed by a second big dip in June 2008. In September 2008 the market plummeted.

    The unemployment rate bumped up in December 2007 and January 2008, stabilized, and then started a sharp rise in June 2008.

    Money supply M2 was useless as an indicator during that period as it continued up throughout.

    GDP growth showed itself to be the trailing indicator which it is, with the 1st and 3rd quarters of 2008 down, and the second quarter up. That down first quarter was a major warning signal.

    And finally, the treasury yield spread became very tight beginning in 2006 as the housing bubble burst and became inverted at the start of 2007 which strongly indicated that a recession was likely. It started to spread back out at the beginning of 2008 as the Fed frantically dropped the fed funds rate, but at that point it was too late.

    With the treasury yield spread as a warning that a big problem was on the horizon, someone following this strategy would have been very focused on the stock market and unemployment blips in late 2007 and early 2008 and probably at a minimum would have gone to a 50/50 stock Fund/F Fund split at that time. Once they saw the GDP growth rate go negative in the first quarter and the strong rise in unemployment starting in June, our hypothetical fed would have gone to bonds until the economy showed signs of turning around and missed the big drop in early fall.

    All in all, I think someone being fairly moderate with this strategy would have lost about 10% in the early market drops, but would have missed out on the catastrophic fall in the second half of 2008 and profited from the rise in bond values as interest rates were slashed. And as soon as the indicators showed signs of a recovery they would have been back into the S Fund and seen returns of 30%+ for three of the past five years, 18% in 2012, and one essentially flat year (-3.3%) in 2011 due to the Eurozone crisis.

    Hope that made some sense. TS

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Mutual Fund and ETF Equivalents to TSP Funds #9457

    TS Paul
    Keymaster

    It sometimes depends on what sort of account I am holding the funds in. If it is in an IRA and I can move them without incurring taxes, I will move to the fund which corresponds to the TSP fund I am currently invested in. But if I would be incurring tax gains by selling and buying a new fund, I might be inclined to hold onto at least part of that fund rather than moving it around (so for example when we move to the C Fund, I might well hold onto my small cap funds in a non-tax advantaged account to avoid the capital gains at that time). But if I think we are going to enter a recession, I will sell all of my stock funds and move to a bond fund because I would rather pay some taxes and earn more in the bond fund than watch all my gains disappear as the market declines.

    I hope that made some sense.

    Best, TS

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Following tspallocation advice retirement. #9072

    TS Paul
    Keymaster

    As always, I can’t give individual advice. But within my own account I think it will depend on how soon I think I will be using that 42%. If that is going to be money I will be counting on using in the next 2-3 years, I would agree that being conservative with it would be a good idea to protect against a significant correction. But otherwise, at 52 I have decades of earning left to do with my TSP and I probably won’t feel like I need to protect such a high percentage.

    Let’s say I had $500,000 in my TSP at this time last year and had done what you describe above. The difference between being fully invested in equities (let’s say the S Fund), and being 58% S Fund and 42% G Fund would have been a return of $191,750 versus a return of $115,184 (111,215 from the S plus 3,969 from the G). I know I’m cherry picking after the great year we had last year, but let’s say the difference was only half that. That’s still a lot of money, even before you compound it at say 10% for twenty years.

    I think the 110 minus your age rule is way too simplistic. There are a lot of variables between different investors. Is that for someone whose retirement income is going to come exclusively from their investments? Or for someone like you who has a significant income coming in from a pension (FERS)? For someone with their house paid off in a place with no state income tax, or someone with a big mortgage in a high cost of living area?

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Alternative TSP contribution plan #8988

    TS Paul
    Keymaster

    That’s a very interesting idea. I think I recall something about folks who are planning to retire part way through the year maxing out their TSP contributions early in the year, even to the extent of putting 100% of their pay into the TSP, so that they take advantage of the pre-tax nature of those contributions. They obviously have to be in a financial position which allows them to live on savings or other income while doing that.

    I have not heard of anyone doing what you are suggesting, but I don’t see a downside to it besides the hassle of having to change your contribution level a couple of times and the risk of messing that up if you aren’t careful.

    There is certainly an upside if the market does well because you have more money in your TSP to take advantage of those gains, but tough to estimate what those might be. If the market has a strong first half, I suppose that could certainly be worth at least a few hundred dollars in additional gains.

    Please do let us know if you go through with it and how it works out. And if anyone reading this has any thoughts or experience, please share.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Individual stock picks – what is your current favorite? #8203

    TS Paul
    Keymaster

    While most of my non-TSP investments are in index funds such as VB (small cap) and WMCR (micro-cap), I do hold some individual stocks.

    Since this thread is “which is your current favorite and I have to limit myself to one, I’ll go with Facebook (FB) which is the stock I hold which I think is most likely to double in the next year or so.

    This is mostly a momentum play (and you have to admit that the momentum has been doing pretty well the last few months). But the fundamentals are starting to catch up a little bit – FB is learning how to make money from all the eyeballs they are attracting and is starting to generate a lot of cash.

    I don’t believe in the management of this company the way I do in an Apple or Google, but right now I think this one has a long ways to run.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Welcome to the TSP Allocation Message Board #7651

    TS Paul
    Keymaster

    Thanks for all of the kind words. I just caught that there were a couple of different questions up above, so I’ll respond to all of those at once here.

    Bear in mind that I am forbidden from giving individual investing advice. What I do here on this website is talk about what I do and try (with not a lot of success) to get other folks talking about what they are doing.

    With respect to the question about time remaining in the workforce, see the thread below titled “Near retirement”: http://www.tspallocation.com/forums/topic/near-retirement/

    There were two questions up there about how/whether to time interfund transfers. Take a look at the “Reserve fund in G” thread for my thoughts on both saving money to buy on dips and “averaging in”: http://www.tspallocation.com/forums/topic/reserve-fund-in-g/

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Individual stock picks – what is your current favorite? #7172

    TS Paul
    Keymaster

    In response to Tracy’s question above and another comment posted the other day, I created a page with the mutual fund and ETF equivalents of the various TSP Funds under the resources tab on the menu at the top of the page (which you probably can’t see if you are reading this on a phone).

    Mutual Fund and ETF Equivalents to TSP Funds

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Exit G Fund #6941

    TS Paul
    Keymaster

    If there is one thing I have learned from reading other financial blogs over the years, it is that I am absolutely forbidden from giving individual portfolio advice to anyone.

    When I am making investment decisions in my own accounts, if I am reasonably convinced that the fund or stock which I am buying is trending up I will not “average in” by buying at different times. Instead I put whatever funds I am investing to work right away. For example, after the shutdown and debt limit nonsense ended I did not see any real hurdles for the market ahead in the next few months and I had some money which I wanted to put to work. I invested all of that money at once (in a Vanguard small cap ETF (VTWO) which mirrors the S Fund).

    In contrast, if I am buying a stock or fund which is beaten up and possibly still falling, I will use the dollar-cost average strategy and invest fixed amounts over time. That results in buying more shares when the price is lower and less when it is more expensive, and results in a lower total average cost per share. So at the tail end of a recession, for example, I might move a fixed percentage from the F Fund to the S Fund each week or month to hedge against the market moving lower.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Submitting Info? #4408

    TS Paul
    Keymaster

    Hi Bob

    You can add attachments to posts only if you register on the site and are logged into WordPress when you post. There should be a login/register box in the column to the right, and then when you are posting the attachments button will appear above the submit button.

    Good question – I didn’t know that until just now when I clicked around trying to figure it out. I think they do that to try to prevent spammers from uploading malicious files.

    Thanks, TS

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Reserve Fund in G #3869

    TS Paul
    Keymaster

    For someone who spends as much time reading (and now writing) about the financial markets as I do, I am not an active trader by any stretch of the imagination.

    I always stay fully invested in whatever fund(s) I believe are indicated by wherever we are in the economic cycle and, as a result, I don’t keep a reserve in my TSP allocation.

    I am a bit more active in my other accounts and will occasionally dump money into an index fund or individual stock when I feel it has been oversold on a pullback to try to do exactly what you are asking about. But I generally don’t have much cash sitting around and don’t hold it in reserve waiting for a pullback.

    I can’t put my hands on it now, but there was a very good study I read some time ago which broke out the surprisingly large percentage of the annual gains in the stock market which happen in just a few big days each year. The thrust of the article was how easy it is to miss those when you try to time the market and turn what could have been a 20% year into a 10% year just by being on the sidelines for a brief period. I think that concept – that I don’t want to take a chance on missing the big up days – has convinced me not to try to game the market too much.

    Thanks very much for the kind words. I started the site to hopefully get a few of the folks who are 100% G Fund or have randomly chosen a mix of funds based on their gut to do a little more thinking about what they are doing. The difference between 1.67% (the G Fund) and 31% (the S Fund) just in the past year is pretty stunning.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Interfund transfer #3399

    TS Paul
    Keymaster

    I don’t want to sound like I am judging what you or anyone else selects as a strategy, but I’ll tell you what I think about when I’m making my own decisions.

    I believe all of the TSP funds you are currently invested in are going to trend up over the next year – so there are no wrong funds there, just some which I think will do better than others. I am not currently in the TSP G Fund because I think the 1.5% interest is so small as to be almost meaningless and represents a lost opportunity when markets are setting new highs on almost a daily basis and I can be in the equity funds, but if you feel better knowing that portion of your TSP allocation is completely safe, there is nothing wrong with that.

    All of the funds are going to generally go up over a long enough period of time, so my strategy really focuses on picking the one or two funds which are likely to perform most strongly right now rather than investing in all of them.

    That you and I have different allocations doesn’t mean that one of us has made a mistake by any means, just that we are employing different strategies.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: I Fund Update #2650

    TS Paul
    Keymaster

    Thanks for keeping me on track. You can tell I have only been putting this out for a few months and am not into a groove and covering everything yet, but I will make sure that I start addressing my thoughts regarding the I Fund in each monthly update going forward.

    If the S Fund wasn’t doing as extraordinarily well as it has been (up 27.4% year to date and 31% over the last 12 months), I would be taking a harder look at the I Fund. But it is hard for me to take money out of something which is doing so well when I don’t see any indications in the data which I look at to make me believe there is a fundamental change in the US economic cycle.

    My sense is that Europe has turned the corner and is into its recovery phase. But I don’t have a great sense of how well that means the I Fund will perform or how consistent it will be. I’m not ready to move any of my allocation into the I Fund at this point, but not because I think it isn’t going to generally trend up. I believe it is probably going to do well over the next year, so while it is not for me right now, I don’t think it is a bad idea.

    I will give it some more thought and study once the circus leaves DC.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Near retirement #2524

    TS Paul
    Keymaster

    Hi Mike

    This is another one of those areas where I diverge from the generic view of things and believe that, with some very rare exceptions, allocations should not change based on age. You don’t stop earning when you retire unless you handicap yourself. My allocation is the same as my retired mother’s, and the same as it would be if I had just started working for the government. This is because I believe that at any given time, there is one fund which is the right fund to be in and all of the others are going to do relatively poorly in comparison.

    My allocation almost certainly won’t change when I near retirement because my goals for my money won’t change. When I retire at 60, let’s say, I will figure that I still have another 30 years or so left and that I am going to want for my money to keep growing as much as possible for all of that time. Why would I switch to something “safe” like the G Fund which is going to just barely keep up with inflation as I start approaching retirement when my earnings horizon goes out for decades to come? Imagine the difference between the 1.5% I could get for the G Fund right now, compared to the 25%+ which I can get for the S Fund. Then compound that for 20 or 30 years.

    That said, the market is occasionally going to have a “correction” or “flash crash” or 10% or greater decline for reasons unrelated to the economic cycle. You can’t predict those. For that reason, if I am planning to take a large withdrawal from my TSP upon retirement to pay off a property, start a business, or travel the world – it would make sense to me to protect that portion of funds which I am counting on using from a significant decline for a year or two prior to withdrawing it. But the rest of my balance will remain invested in whichever fund is indicated by the phase of the economic cycle we are in.

    Best, TS

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Government Shutdown #2307

    TS Paul
    Keymaster

    I definitely contemplated doing what you did (although I would have gone into the TSP G Fund rather than the F Fund – you should read my post on why the F Fund is so bad in a rising interest rate environment when you get a minute) and could easily be in the same position as you find yourself in. That was unfortunate timing – after Speaker Boehner’s press conference in which he announced the GOP’s plan to do a short term extension of the debt ceiling the market had its best day since December 2011. But I wouldn’t stay out and hope for it to come back down to you. I think the momentum is really there for a deal so they can put this behind them now if they can just come up with some face saving accomplishment and the market will react similarly again, so I am pretty comfortable being 100% in the TSP S Fund right now.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Government Shutdown #1871

    TS Paul
    Keymaster

    Hi Bob

    I am still 100% S Fund, despite the shutdown. The shutdown, even if it lasts a few weeks, would not be enough to really impact the economic cycle. A default on the nation’s debt (not raising the debt ceiling), on the other hand, could very well push us back into recession – but I don’t believe that will happen.

    I thought we might see a dip with the shutdown and I did seriously consider going to a 50% position in the G Fund and buying back in on that dip, particularly because I didn’t see much chance that I would miss out on a big move to the upside. But it wasn’t a sure thing, and that would have been a pretty dramatic departure from the very long term approach which I advocate here.

    As far as the debt ceiling goes, I believe that the Tea Party wing may well push it right up the wire, but then either they will declare some imaginary victory and agree to raise the limit, or else Speaker Boehner will allow a vote to raise the ceiling which Democrats will support along with enough moderate Republicans to pass. I don’t see any possibility that Congress will allow the US to go into default.

    I think it will be a very choppy next week or two, but I think the above assumptions are pretty well priced in. I doubt we will see more than about a 3% drop at worst. And when a continuing resolution is passed (and one will be), the market will rally a bit. And when the debt limit is raised, we will similarly see a small rally.

    So I’m staying the course. That said, I don’t see a huge move to the upside even once the shutdown ends and the debt ceiling is raised, so for folks who are nervous it wouldn’t be a disaster to move some or all of their balance into the G Fund briefly.

    -TS

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Escaping the F Fund #1048

    TS Paul
    Keymaster

    I have a hard time believing interest rates have any potential for dropping and are more likely to continue trending upwards as the Fed starts to throttle back quantitative easing, so I would go cold turkey if I had any exposure to bonds. Best case is interest rates stay roughly where they are for a few months so the TSP F Fund gets a percent or two of return during that time, but that minimal reward does not outweigh the very real risk of another spike in rates in my estimation. There is always some possibility there might be a month or two mixed in going forward where the F Fund looks like it is turning back around and people who want to believe they are going to get some of their losses back will seize on that and hold on. But while I am a big believer in reversion to the mean, I don’t think that reversion is coming for a couple of years.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Market timing #793

    TS Paul
    Keymaster

    Thanks very much for the question. I have received basically the same query several times by email and had meant to go back and address this in my initial post.

    I do not try to time the stock market. I don’t think it can be done by a regular investor. The stock market is much too subject to manipulation by hedge funds, investment banks and the media. For every indicator which technical traders cite, there are a dozen exceptions to that rule. Whenever someone discovers a pattern which can be traded on, the funds and the investment banks add an algorithm to their trading computers so that long before you or I could possibly spot the trend, they have already made their trades, the value to be had is pulled out of the price of the security, and the opportunity is gone.

    I try to time the economic cycle, and make investment decisions based on where we are at any given time in that cycle. The US economic cycle is much too broad for anyone but the Federal Government to impact, and even the government can only try to nudge the economy in the desired direction.

    Everybody out there is trying to sell you something. The talking heads on CNBC and Bloomberg are selling ad time – they don’t care about what they are talking about, they just need it to be exciting enough to keep you watching through the next commercial break. Brokers and financial advisers generally make their money through commissions on the products you buy – the more you move your money around, the more they make.

    Warren Buffett is a big proponent of “buy and hold.” But he doesn’t buy stocks to hold the way that we do, he buys companies. Buffett wants nothing more than for you to buy and hold shares of Berkshire Hathaway (or the stocks of the companies which he recommends after Berkshire buys them) for the rest of your life so those shares are effectively taken out of circulation, making the remaining shares on the market more valuable.

    And this will be sacrilege for the Bogleheads among our readers, but John Bogle wasn’t in the business of giving out investment advice. He was in the low cost mutual fund business. In that business model, Vanguard doesn’t make money when you swap between mutual funds, that actually costs them money. The very best thing for Vanguard is for investors to buy and hold Vanguard mutual funds so that those “expenses” which you get charged on every dollar you have invested keep rolling in forever.

    Below are Bogle’s eight basic rules for investors:

    1. Select low-cost index funds [a Vanguard creation]
    2. Consider carefully the added costs of advice [Vanguard wants you to buy their index funds, not actively managed funds]
    3. Do not overrate past fund performance
    4. Use past performance to determine consistency and risk
    5. Beware of stars (as in, star mutual fund managers) [Vanguard wants you to hold onto their index funds, not chase after active funds managed by other companies]
    6. Beware of asset size
    7. Don’t own too many funds
    8. Buy your fund portfolio – and hold it [Vanguard only makes money when you are holding a stock]

    Don’t get me wrong, I own Berkshire Hathaway stock (because they have the access to do research which we do not before they buy a stock, and can move the stock’s price at will just by announcing they have bought it), and I almost exclusively use Vanguard funds and ETFs (due to their low expense ratios).

    And finally, why isn’t everybody doing what we do here? Most of them are, in addition to the minute by minute or day by day trades for which they are more famous. The big guys certainly actively trade on economic cycle indicators, and adjust the sectors of the market in which they invest based on the cycle. But nobody besides a few authors have a financial incentive to help you find your way around this corner of the investing world because there is nothing to sell you.

    That was a mouthful and I certainly shouldn’t have the final word on a subject as important as this. What are your thoughts?

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Printer Friendly #641

    TS Paul
    Keymaster

    FL Bob

    All set – there is now a print icon down below each article after the sharing buttons (Facebook, Twitter, etc.). Just click on that – maybe after you click on one or two of the sharing buttons 😉 – and it should send it straight to the printer in a pretty clean format.

    Thanks for reading. -TS

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: Printer Friendly #636

    TS Paul
    Keymaster

    Hi FL Bob

    I will do a little poking around and see if there isn’t a good plugin which will give users an icon to click to create a good, printer friendly version. It is on the to-do list now.

    In the meantime, if Firefox is available on your machine, I see that it creates a much better looking print version than Internet Explorer does.

    Thanks, TS

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: What happened to the dog in the hat? #521

    TS Paul
    Keymaster

    That’s too funny. I waited three weeks for someone to finally post on the message board instead of emailing me and instead of a complicated TSP loan or FERS question, the ‘dog in the hat’ was the first topic raised.

    For anyone who hasn’t been following along on social media, I did change my avatar a few weeks ago from this:

    TS Pal

    I have been doing some collaboration on the site with a few like-minded investors whose opinions I respect and one of them told me that the older picture was a bit juvenile and just might cause some readers to not take the website seriously. I am sure that it was just a coincidence, but traffic to the site did really start to take off about the time I made the switch.

    I did create a hidden page just for him so he will never really be gone here.

    Thanks very much for breaking the ice and posting the first topic. -TS

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: family money #519

    TS Paul
    Keymaster

    I believe that that this may be what they are talking about when they refer to “first world problems.” 😉

    At the outset, assuming that you are under FERS if you are not contributing at least 5% to your TSP, you are throwing money away because you are not receiving your agency matching contributions. I would strongly encourage you to at least be doing that.

    I suppose to really answer your question correctly, I would have to know a lot more. How old are your parents now? And do they plan to start sharing some of their money with you while they are still around, or are you just counting on them going at a reasonable age?

    Your worst case scenario is that you don’t save anything for retirement and the day comes when you are ready to do nothing but play golf and go fishing, but your parents have inconveniently lived longer than you planned. The TSP has an excellent publication called Withdrawing Your TSP Account which details just how long they may stick around.

    Life Expectancy Chart

    Or one of them could become sick and your inheritance could be spent on treatments not covered by their insurance, or they could make a really bad investment, or they could join a cult and leave their fortune to the Raelian movement.

    So if I were in your shoes, unless the trust already exists and you get to start pulling money out at 50, I would prepare for my retirement as if I was going to receive nothing at any time when you might actually need it.

    The TSP Allocation Guide www.TSPallocation.com

    in reply to: This Summer? #468

    TS Paul
    Keymaster

    Thanks very much for posting, and I promise I am not going to monopolize the message board and race to be the first to respond to everything.

    For this summer? I don’t know what the next month or two will hold (and I certainly expect some blips), but I do feel fairly confident that the S Fund (and C Fund) will end the year higher than it is now, and that’s more the time period I feel comfortable looking at. And if I could short the F Fund, I would do it, because I am very confident it will be lower.

    As far as that particular article, I am not a big fan of technical analysis. My investing life has been spent in pursuit of a system which is simple and works to predict movements in the stock market, so TA has a lot of appeal. I did a lot of reading and experimentation and was never able to satisfy myself that there was a way to successfully apply it. That is when I moved on to how the bigger economic picture and indicators from outside of the market impacts the stock (and bond) markets for making my decisions.

    It may well be a rough summer for stocks, but I don’t know if the advance-decline line is a bell weather. When I look at the chart below, I see that there was a significant deviation in June and the market fell, but then immediately started back up and went on to new highs. The deviation is less pronounced now, so does that mean a smaller fall and then more highs again? Or does that just mean that the A-D line will come back up to meet the S&P as it sometimes does?

    advance decline tsp allocationThe hedge funds with their MIT statisticians and super computers can’t trade successfully on these things, so in my simple view of the world I tend to see technical analysis as a financial version of palm reading. I know that’s heresy to the “inverted teacup” crowd. In looking at individual stocks I do look at moving averages and trend lines, but I don’t buy into the

    That’s just one guy’s opinion. What does everyone else think the summer holds?

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    The TSP Allocation Guide www.TSPallocation.com

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