ChemEng's Account talk...

[ChemEng]

Today Ive moved into 35%G, 10%C, 25%S, 30%I.

Its looking that today will be a decent stock gain so Im pulling out slightly in anticipation of a drop come Monday. Its not a complete pull-out because there may still be some fight in the stocks. I debated moving the 35% into F, but it looks like the F fund will have a gain today as well. I would rather move my "reserve" into it on one of the days it dipps instead when its potentially moving up.

Edit -- After looking at the IFTs for the day, it seems that Im on track with most of the masses. Thats a good feeling... Maybe theres hope for me yet...

 

[ChemEng]

About a year ago a member (was it Rod or Mlk_man or me -- can't remember) did a days of the week analysis. I know Rod traded using the days of the week method for awhile. Anyway, Mondays were down more often than up, thus Friday's would be a good day to get out if using this method.

(It's probably time to do the analysis again - any volunteers?)

I ran the numbers based from the prospective of a non-financial analyst. Heres the assumptions I made:
1. Used TSP fund prices to measure of returns. (FV will mess with I fund.)
2. Only evaluated Fridays that are followed by Mondays. (Holiday weekends are excluded.) This would just require more spreadsheet-ology...
3. A down indication says that the close on Monday was lower than the close on Friday. An up indicates the opposite. Same means they were the same.
4. Win % is percent of times Monday is lower than Friday. NotLose % is percent of time Monday is lower or same as Friday.

Heres what I came up with for 3 years of returns (137 Fri-Mon pairings):
F fund: down 47, up 55, same 35. Win 34%. NotLose 60%.
C fund: down 58, up 76, same 3. Win 42%. NotLose 45%.
S fund: down 58, up 76, same 3. Win 42%. NotLose 45%.
I fund: down 63, up 71, same 3. Win 46%. NotLose 48%.

I ran the numbers again for the 2006 returns heres what I got (25 Fri-Mon pairings):
F fund: down 6, up 8, same 11. Win 24%. NotLose 68%.
C fund: down 12, up 13, same 0. Win 48%. NotLose 48%
S fund: down 14 up 10, same 1. Win 56%. NotLose 58%.
I fund: down 11, up 14, same 0. Win 44%. NotLose 44%.

It seems like winning with this strategy would be less than a coin flip for most situations. Not losing increases the odds slightly adding F fund and S fund as options.

Did I miss anything? Maybe it better to bet that they close higher than Friday?!

 

[ChemEng]

I went 20%G, 20%C, 20%S, 40%I today. The prices look like they are adjusting off last week's highs, so I moved into them. I kept 20%G because it's due for the penny tonight (I hope!) and depending on the direction of this afternoon's and tomorrow morning's inflation talk, I may need a reserve to buy more if the C/S/I drop tomorrow as well.

 

[Dave M]

ChemE

Welcome. You are really busy! When you get done at the end of the month, calculate a fixed allocation for that month that would have brought in the same return. Note how that fixed allocation varies from month to month.

You will find there is stability. Then you will realize that you could have saved yourself a lot of trouble by adopting that allocation in the first place.

In other words, pick a risk level, spread it around, leave it alone except for emergencies (like last May). This idea is sustained by the negative corelation that exists between number of moves and rate of return among the savants here -- see the tracker.

Good luck!
Dave

 

[ChemEng]

100%G effective today to protect the past 2 days of returns. I think confidence will be low next week until FOMC on Tuesday which may give another good buy time to buy mid next week. (Hopefully its not too late to catch a penny.

 

[ChemEng]

Stupid after 12pm market flip-flops.

 

[ChemEng]

I went from 100%G to 30%G, 30%C, 40%I. The dips this morning were strong enough to trigger a buy. But since there is still some uncertainty about what can happen tomorrow and how the market will react, I didnt go 100%. First, I kept 30%G as a reserve for another buy should there be another drop tomorrow. Second, I put 30%C instead of 30%S because the C tends to be less volatile than S even though VERY strongly correlated.

Im not sure how to plan tomorrow since the minutes arent released until 1400EST. Anyone think that there's any chance that we'll get an indication before 1200? What strategies is everyone using tomorrows IFTs?

 

[ChemEng]

Finally, a day ends in the positive! I think tomorrow Im going to move back into 100%G. Well see how the market moves tomorrow morning...

 

[ChemEng]

It looks like a good day for C, S, and I finds (finally). So I moved my 100%I postion into 30%C, 30%S, and 40%I. Im kind of hesitant of staying 100% in 1 fund for long, so this move will help spread the risk instead of pool it.

 

[ChemEng]

CPAC didnt mess up this job offer! (No offense if you work for CPAC. I have had a string of bad experiences with them.) And my brand new GS13 job starts Monday.

More money means more savings. More savings means more money to put in TSP...

*high-fives self*

Ok. All better now. And now back to your regularly scheduled program.

 

[ocean]

CPAC didnt mess up this job offer! (No offense if you work for CPAC. I have had a string of bad experiences with them.) And my brand new GS13 job starts Monday.

More money means more savings. More savings means more money to put in TSP...

*high-fives self*

Ok. All better now. And now back to your regularly scheduled program.

More money to put in TSP means more spending power when you retire ...
Congrats to your new position.

Ocean

 

[ChemEng]

Thanks for the congrats.

Today I went 50/0/10/20/20. I wanted to pull in some of the gains from the past few days and start looking for another buy-in time. Maybe, just maybe, tomorrow will get the penny instead of tonight but I doubt it. Well see how it goes...

 

[ChemEng]

Sold out of C/S today for a day or two. I got the fear about tomorrow for many reasons. If tomorrow is down, then will buy back into stocks strong. Else I will look into shifting into F fund.

Additionally, I think I will start using the F fund instead of the G fund to protect capital with at least until the next interest rate announcement.

Geez... My strategy is starting to look similar to EbbnFlows...

 

[ChemEng]

Ive been talking in the IRA group about Roth IRAs and decided to crunch some numbers to help inform my decision. Basically, I want help to make sure that I did the math on the attached spreadsheet right and that my assumptions arent wrong or too aggressive.

Heres the assumptions I made:
1. 30 years until retirement. After that, a 30 year annuity is set up.
2. Average growth rate will be 5% for Roth and TSP.
3. 2% COLA increase will increase TSP contributions yearly (above the % contribution).
4. In 2010, Roth contributions will began to increase at 2%/year.
5. I keep 5% contribution to TSP even with Roth to maximize matching contributions.
6. 30% tax rate on income taken from TSP.

If that is reasonable, it looks like a $20K/yr difference investing in Roth. That is much more significant than I initially though. How close is this analysis to the mark? Did I miss anything?

*high fives himself for finally putting the MBA to work*

 

[EW_ret]

Examining your spreadsheet, it appears you are comparing the after taxes average yearly withdrawal from a combination of Roth and TSP (columns B-E) with just contributing to your TSP (column H and I). Is this what you are comparing?

The average yearly withdrawal rate from Roth+TSP ($71,685) is in error and should be $53,991 because in the formula F31 should be changed to read E31. Cell F31 is the sum of Roth and TSP final values, whereas E31 is just the TSP final value. I cannot verify the formula you used to arrive at the average yearly withdrawal amount to deplete you funds in thirty years. I don't have time to derive it now. [i.e. Average yearly withdrawal = (Final Value*1.05^30*0.05)/(1.05^30-1)}.

If you are comparing Roth+TSP with TSP why is the contributions for just TSP not equal to sum of the contributions to Roth and TSP?

Here is URL to a money article on advantages of Roth over traditional 401K and IRA. http://money.cnn.com/magazines/moneymag/moneymag_archive/2006/08/01/8382153/index.htm

 

[ChemEng]

That is what I am comparing. Although with the Roth and TSP, I only taxed the returns from the TSP. Is this the comparison I should be making?

It should be E31. Thanks for catching the mistake in the formula.

The reasons that Roth+TSP <> TSP is because they are done on different tax bases. If you adjusted the Roth to pretax money, then they should be equal. Or I guess you could add the amount of tax that a given TSP contribution would generate to Roth and TSP which should also be equal.

Ill update the spreadsheet. Will do some what-ifs with it tonight. But based on that correction, it doesnt look like much of a reason for going into a Roth based on the dollars. Control, availability, and options are considerations in favor of the Roth. But strictly from a dollar perspective Im not seeing the advantage.

 

[ChemEng]

**Updated spreadsheet.**

Ive been talking in the IRA group about Roth IRAs and decided to crunch some numbers to help inform my decision. Basically, I want help to make sure that I did the math on the attached spreadsheet right and that my assumptions arent wrong or too aggressive.

Heres the assumptions I made:
1. 30 years until retirement. After that, a 30 year annuity is set up.
2. Average growth rate will be 5% for Roth and TSP.
3. 2% COLA increase will increase TSP contributions yearly (above the % contribution).
4. In 2010, Roth contributions will began to increase at 2%/year.
5. I keep 5% contribution to TSP even with Roth to maximize matching contributions.
6. 30% tax rate on income taken from TSP.

If that is reasonable, then there is no significant difference on a cash basis between the options. How close is this analysis to the mark? Did I miss anything?

 

[CountryBoy]

ChemEng,

Control, availability, and options are probably the 3 major reasons why I'm looking at opening a Roth at this time. I'm 5 to 9 years to retirement and never have opened a Roth, so I'm late coming to this game of investing outside of my TSP. :embarrest:

The ability to select some individual stocks (thanks Birch) for my Roth is more appealing than some form of Lifecycle fund offered by a funds company, they are all pretty much like our L Fund. Plus I have a couple of Mutuals, so I wanted the extra flexibility.

Somewhere I read that you had to have a Roth for 5 years, before you could draw from it. Am I mistaken about this?

Pedaling hard to catch up with a diversified portfolio. All advice is welcome.

CB

 

[EW_ret]

If you are comparing Roth+TSP with TSP why is the contributions for just TSP not equal to sum of the contributions to Roth and TSP?

I see why there is a difference. Your limited by the $4,000 Roth maximum + 10% salary whereas the contribution to just a TSP represents 20% of salary. Is this correct? The TSP has a maximum contribution $15,000 yearly from you, not counting the government match. If your contribution dollar amounts to Roth+TSP were equal to contribution to TSP, it would all be equal. Read the article I posted below. It discusses the Roth advantage.

Think of it this way, and stop trying to compare TSP versus Roth. Contribute as much as you can to your TSP and use the tax-deferred savings to fund your Roth IRA. If you could contribute the maximum $15,000 to your TSP the tax-deferred savings would be 15,000X.30 = $4,500. This is more than the current $4,000 Roth limit. Your tax deferral and its earnings then becomes nontaxable in the Roth.

 

[EW_ret]

Examining your spreadsheet, it appears you are comparing the after taxes average yearly withdrawal from a combination of Roth and TSP (columns B-E) with just contributing to your TSP (column H and I). Is this what you are comparing?

The average yearly withdrawal rate from Roth+TSP ($71,685) is in error and should be $53,991 because in the formula F31 should be changed to read E31. Cell F31 is the sum of Roth and TSP final values, whereas E31 is just the TSP final value. I cannot verify the formula you used to arrive at the average yearly withdrawal amount to deplete you funds in thirty years. I don't have time to derive it now. [i.e. Average yearly withdrawal = (Final Value*1.05^30*0.05)/(1.05^30-1)}.

If you are comparing Roth+TSP with TSP why is the contributions for just TSP not equal to sum of the contributions to Roth and TSP?

Here is URL to a money article on advantages of Roth over traditional 401K and IRA. http://money.cnn.com/magazines/money...2153/index.htm