A Study of Your Returns

[SkyPilot]

I was hoping to find a resource where people could help provide information about the TSP that I didn't know.

All you really need to know about buying and holding TSP funds is probably to be found on the TSP website where each fund is clearly explained.

If you are buying and holding, then understanding anything beyond the risk factor of each fund is essentially useless, isn't it? If that's not enough, then use an L account (which are not really funds, but blended rebalancing portfolios of the GFCSI funds).

A poor buy and hold allocation may do as much or more long term damage than a flawed trading strategy.

Your methodology and explanations have been reviewed and examined, with significant errors, gaps and faulty assumptions detailed.

I think what you are doing is trying to establish yourself as an authority, with a desire to be respected for your insight.

 

[ATCJeff]

An artificial sweetener, C14H18N2O5, formed from aspartic acid.

I’m improving my vocabulary as well as my TSP balance.

I like it!

http://www.par-chem.com/Product.aspx?ProductId=42&Name=Aspartame

 

[Fivetears]

Fantastic!
But be advised; your gonna get an itchy IFT finger once you start seeing how far up the top ten climb in returns... and see how they're doing it. As of yesterday I have a 20.36% YTD Return, as well as a few marked mistakes, and I enjoyed every minute of it. The way I see it... I got four weeks to beat the I-Fund; My personal Goal. Good luck, and welcome aboard.

I suppose I could come up with the closest thing to my allocation using only the TSP (although it wouldn't actually reflect my true TSP investment returns since as I mentioned I hold investments elsewhere that contribute to my asset allocation,) and post that. It would work out to about 25% G, 25% I, 20% C, and 30% S. I'll throw my hat in the ring come Jan 1, but remember, my goal isn't to come out on top, it is to come out above average. With that allocation (which I have held for the last couple of years, BTW), I would have gotten 8.66% in 2005 (beating 67% of you) and 13.87% so far this year (beating 58% of you.) All without a single trade all year or any insight into the future of the markets.

 

[Oldcoin]

I like it!

http://www.par-chem.com/Product.aspx?ProductId=42&Name=Aspartame

What a great site.....or should I say "sweet" naw....

 

[rokid]

This post appeared on the Diehards bulletin board in response to Desperado's, aka, Emergdoc's post:

"But what about the "Warren Buffets" of the group. Surely there must be at least a few very talented traders in this group. In a random distribution, one would expect approximately 5% (or about 2 traders) to perform better than 2 standard deviations above the mean. In fact, no traders managed this feat, suggesting that the outperformance of their top performers was less likely to be due to skill than sheer luck. In fact, a distribution of monkeys throwing darts to choose their allocations would likely have produced a higher performer than these 48 investors. One would also expect 33% of investors to perform better than 1 standard deviation above the mean. In fact, only 14.5% of investors did so.

Actually this calculation does not tell you whether these traders were better than monkeys, because you are comparing the returns of the group to itself. So the number of traders below one or two SDs only tells you about the distribution characteristics (e.g. whether it is skewed) of the group returns and nothing about their skill or lack thereof.

For example, the entire group could be Warren Buffets, only that the distribution does not follow a perfect normal distribution, so you won't find the exact number of expected traders above one or two SDs. Conversely, these could be the worst group of investors of all time. But your calculation does not tell you that.

To tell whether the trader group is different from the "monkeys" you will have to compare the distribution characteristics of the trader returns to the returns of a series of randomly generated portfolios."----Mudfud

I suspected Desperado's statistical claim was incorrect. However, I believe this confirms it.

 

[Desperado]

Actually this calculation does not tell you whether these traders were better than monkeys, because you are comparing the returns of the group to itself. So the number of traders below one or two SDs only tells you about the distribution characteristics (e.g. whether it is skewed) of the group returns and nothing about their skill or lack thereof.

.

Let me see if I can figure out how to generate a random distribution of returns. That may require more computing power, statistical skills, and frankly, time, than I have.

 

[Griffin]

Desperado,

What you do is take the the raw price data, create a corresponding spreadsheet with the daily returns using the simple (x1-x2)/x1 formula. Then use the random generation function in excel "rand" to generate a column from one to five (if you want to use all five funds) or one to three for just the stock funds. In the next column, use the "if" feature in excel to generate the relationship to the randomized column and a corresponding return. Finally, have another column to create a continous running return total. You will end up with one randomized return for the timeframe you establish. Simply repeat this process a few hundred times (i.e. copy and paste the formulas into repetitive new spreadsheets within the same book). Tabulate the results and you will have a comparitive data set to work against.

It is going to be a time consuming process, mostly cutting and pasting.

 

[fabijo]

If you want the raw price data for the funds, I'm sure someone on this board already did the cutting and pasting and has them in an Excel spreadsheet.
The next part of copying and pasting would be easy. Once you make one row of formulae, select all the cells from that row and hit "copy." Next, select the next row down and drag down until you have hundreds of rows of the same columns selected. Now hit "paste" and it will create the appropriate formula into each cell.

 

[Desperado]

This time with the monkeys

Okay, a great big mea culpa. I didn't actually compare you all to a bunch of monkeys the first time. I compared you to each other. Unfortunately, that made you look a little too good. To refresh your memory, here are the characteristics of YOUR data set:

48 investors
High Return (Yay Fundsurfer) 22.16%
Low Return -4.01%
Mean 11.65%
Median 11.97%
St Dev 5.51%

Now for the monkeys (I only did 48 Griffin because I couldn't quite automate the entire process because the If function only allowed me to use 2 choices)

48 Monkeys
High Return 24.37%
Low Return 2.92%
Mean 12.07%
Median 12.33%
St Dev 5.17%

Kind of eerie isn't it? So, in a normal distribution, you expect 2.5% of monkeys to score better than two standard deviations above the mean. In fact, 3 monkeys do (6.25%). And you expect 2.5% of monkeys to score worse than 2 standard deviations below the mean. In fact, none do. What does this tell us? It tells us I found the best damn monkey dart throwers in the business apparently and makes us question the randomness of the sample. But repeating the exercise with just 1 standard deviation above and below (remember we expect 16% of monkeys to be above 1 SD and 16% to be below) we find that the numbers are 6 above (13%) and 7 below (15%). So maybe these monkeys aren't all that special, just a couple of them got lucky and none of them got really unlucky. Maybe there is some wisdom there.

The fact remains that only 50% of you beat the monkeys. Kind of sobering isn't it. How come no one got as lucky as the monkeys did? I mean, some of you must be better at analyzing the markets than sheer random luck would be?

Disclaimer: I only allowed the monkeys to trade once a month as I was unable to get my hands on the daily returns for each of the funds. (Not to mention that I really didn't want to crunch quite that much data. But I suspect the results would be very similar.)

 

[rokid]

Would you share the spreadsheet with us?

 

[fabijo]

Here, I just made a spreadsheet that has the daily fund prices from June 2, 2003 until November 30, 2006. I also made a column next to each fund's price that shows the percentage change from one day to the next. Also, there is a sheet called Charts that shows the price of each fund in chart form.

Do what you want with this data. Let's see what the monkeys do when they are allowed to throw darts daily.

p.s. If you want to include more choices on an if() statement, just add another if() where you would put the else. E.G.:

if([statement if true], [statement if false])

You could do this:

if([statement if true], if([statement if true], if([statement if true], [statement if false])))

 

[Spaf]

A Perfect Display of Why Market Timing Doesn’t Work

Market timing can be expressed in various terms: day trading, swing trading, position trading, trend trading, and etc.

Trading works on the strategy and risk principal. It's up to the individual investor what they want to do.

However, the major option is to prevent a big loss. Something that is ignored in the buy-and-hold strategy.

Granted, some traders are below average, but they get to learn from lessons and can play again.

Whether a certain investor is below a criteria is unimportant. The real deal is that we have a message board where we can fuss and discuss.

Spaf

 

[Griffin]

Re: This time with the monkeys

(I only did 48 Griffin because I couldn't quite automate the entire process because the If function only allowed me to use 2 choices)

Correct about the if statement - you have to use a string of them, like Fabijo said. Did your monkeys only have choice between two funds?

 

[Desperado]

Re: This time with the monkeys

Correct about the if statement - you have to use a string of them, like Fabijo said. Did your monkeys only have choice between two funds?

No, the monkeys had a choice of all 5 funds, but they could only trade on the first of the month. How do I post a spreadsheet to this message board?

 

[Griffin]

When you are in the "Reply to Thread" window, scroll down, you will see a button called "manage attachments" - that will bring up a window for uploading files.

 

[SkyPilot]

But if you would prefer me to post my actual TSP funds, I could do that instead.

We are waiting...

 

[Rod]

We are waiting...

Still waiting...