let me say this up front, i don't mean this to be an excuse or grumbling about some losses i have taken. i recognize that i am responsible for my decisions that i make and that all games have rules. i try not to complain too much about the tsp ift restrictions because it is simply an obstacle to figure out how to overcome. what bothers me though is that i don't think it makes much sense or even needs to be an obstacle, and i think it costs us all way more than we know. i will try to explain.
i think there are two rules that are terribly unfair and hamper any tsp participant's chances to grow their money: 1) the ift deadline of noon eastern time (4 hours before the market closes), and 2) the ift limit of two trades per month. i do not buy the reasons usually put forth to justify these restrictions and i wonder why they are in place. here is what i think (conspiracy alert...).
in general the rough argument goes that the tsp is designed to be a long-term focused savings and not a day-trading market vehicle, that an individual could lose their savings and so we need to limit how bad folks can hurt themselves being stupid, but in reality i think this 'save us from ourselves oversight' costs us far more. i resent that somebody else is basically limiting my freedom with my resources to advance my situation as i see fit and what i am able to do with my money.
1) why the 4 hour delay? because the tsp 'funds' are not really registered securities traded on any open market free exchange, they are proxies designed to mimic the market and the 4 hour delay is to give the technicians to 'sync up' with the actual market. why? who benefits?
2) why the 2 ift per month trading limit? because the 'money' in the tsp funds is not really money. you never actually get it in your paycheck and put it in an envelope and lick the self-adhesive stamp and send anyone any money. it is all digital credits or entries on a balance sheet and nothing real every goes anywhere. it is paid to you, direct deposited as a digital positive entry after other digital subtractions are made, to the irs, to health insurance, to tsp, to united way, to whatever. another thing to keep in mind is that the 'money' in the tsp is not 'now' money, it is 'later' money. as such it is not really a big pile of cash like an asset in a vault, on the tsp balance sheet it is actually a liability to be paid out later. who would want to hold such a big liability? why? who benefits in the interim holding the potential money before the actual money payout happens?
there are many parts to the answers to those two questions of time delay and trade restrictions. some are small easy common sense, and some are bigger and more vague and require more trust/skepticism.
i will address each on their own in a later post(s). but first, who does not benefit? who loses? how?
for that i will point to two trading days. illustrated by two decisions i made. november 17 i got out and if i had got out 1 day later i would have made an additional 1.5%. on december 10 i got in and if i had got in 1 day later i would've saved a 2% loss. why did i make those moves? would i have made the same moves at 3:59 pm as i did at 11:59 am? two trading days, 48 hours, 3.5%. who would love to make 3.5% in a year, let alone 48 hours? i believe that the trading deadline of noon forces us to second guess the market and make decisions with imperfect information, to our detriment. would i have made those trades on those days if had more days to get in and get out rather than just two windows to spot a scenario and execute a plan? would i make different decisions if i had more opportunities to make decisions?
i believe the restrictions of the tsp system hamstring our freedom to advance ourselves and our financial positions. i am ok with any wrong choices i may make, but i am not ok with anybody limiting my choices. and i am definitely not ok with someone else profiting off access to my money while my hands are tied.
i'll get to the rest later.