Dave's Account Talk

[Birchtree]

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I wrote a response to Aslan who is 100% S fund - stating that at the end of the last 3 Fed tightenings, six months later the small-cap stocks outperformed large caps in all three cycles. The conundrum this time is that small-caps have already outperformed large cap issues for the past six years. The possibility exists that we may be approaching a distributional topping pattern for the S fund. Future gains may be limited - money can still be made - and you shouldn't lose money. Also you will notice how expensive it has gotten in relation to the C fund. If you simply must have some S fund perhaps a reversal of percentages with the I fund would be more cost effective for your dollar cost averaging goals. Any way where you are is very reasonable - certainly more offensive that your past positions. Good luck.

 

[Dave M]

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Today I adjusted my contribution allocation to 40C 40S 20I. My balance is allocated 2/3G 1/3FCSI. What I will do is watch the share-countand see how it goes; this is quite easily adjusted without disturbing the account. (My contributions are pretty hefty as I am maxed out percentage-wise and I am kicking in max catch-up as well. In Q3 they will total about$4500 including the gov't match.)

Dave

 

[Dave M]

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This week has me thinking I could better take advantage of our current good fortune by rebalancing.A little less G-fund, no moreF-fund, more C,S and I. The F-fund wasgood for a while but is now flat over the last 30 days.

The mix60G 16C 16S 8I would be in proportion with my contributions which go 40C-40S-20I.I expect I will do this Monday morning.

Dave

 

[Dave M]

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BT, I'm joining you -- taking my own advice actually, and making hay while the sun shines.Now I am thinking 40G 24C 24S 12I. (In the 4th quarter of 2004 I was 40G 30C 30S and made some great money.) That would need close watching.

Dave

 

[Birchtree]

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You are coming out to fight the Fed - DMA will call you crazy. The Technician will add his comments of caution - Birch says go for the rumble. Coolhand is saving 25G for the rescue of the pretty girl if and when she stumbles. You are in a good position to take advantage of that particular scenario. In the first year of the presidential cycle the last 5 trading days of July have been up 70% of the time. What I really need is for the Chicago PMI to remain above 50 - comes out 7/29. The pretty girl is in reference to the bodacious S fund. Never let them see you going to the bank - just kidding.

 

[Birchtree]

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I noticed the pretty girl fell into your arms today. If she shows further signs of fainting will you provide some tenderness from your G fund reserve. You may have to experience a little rain before the sun shines again. Anyway, have FUN.

Dennis

 

[Dave M]

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Well shejust gave me 3011 kisses and appears to be completely revived. D

 

[Dave M]

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Slow and steady wins the race.

I have come to respect the opinion that we cannot know what the market will do in the future, but we can see what it is doing at present and what it has done in the past. For this, the charts that TSPGO prepares are very instructive.

-GO is systematic and obeys his rules always. I don't have any rules, really; I'm more intuitive than systematic. (This sometimes confounds my colleagues.) I appreciate the charts, though. They show the current price as being above the moving average, in the three stock funds.That right there is about all I need to know.

Dave

 

[Birchtree]

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DaveM,

I'm sure you had a good day today - better one coming tomorrow. Is that extra cash burning a hole in your pocket yet? I know it's a sacrifice holding that much.

 

[Dave M]

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If the sun shines tomorrow, I have in mindputting the other 40% to work and going 40C 40S 20I for the coming week.

I was 40G 30C 30S on Jan 3rd. Unsuccessfulmanuevers to avoid losses in the early part of this year alsomanaged to avoid gains. A back-of-the-envelope calculation shows that had I done nothing, my balance would be higher today.

Therefore I still have ground to make up and now seems a good time to do it.

Dave

 

[Dave M]

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Here is my tally for the month of July. The index I track is the sum of the C+S+I funds but without the decimal point.

On the 1st it stood at 4321 and on the 29th it was 4495, an increase of 174 points, or 4%.For me it translated into a 1.5% increase on my total balance as I was not fully invested, and not counting my contributions for the month. This equaled myearnings for the entire 2nd quarter so I am well-pleased.

We've had a good run, starting sometime in late April or early May. It wiped out all the losses which had accrued since the 4397 high on March 7th and established new highs for the year. The message is, just hold on and the market will come back.

So I intend to remain 40G 24C 24S 12I, with contributions going 40C 40S 20I:No more trying to outwit the market by selling high and then buying low. It sounds so good but cannot be done in practice. The remaining 40% in the G-fund is two things -- it will have some earnings and act as a little insurance to counteract losses if there shouldbe a sell-off, and it stands as a reserve which I can commit later in the year.

I have to thank member TSPGO for the charts on his site. If you have not visited him, you should.

Good luck everybody.

Dave

 

[Dave M]

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I sing the praises of diversification. At the mid-way point in August I havepositive results for the month,mainly because the I-fund has been carrying the ball lately; the C and S funds havedoggedit, especially the latter.

In Q1 this year I would have bailed at some point givensome of our recentBIG down-days. Had I done so here I would certainly have missed many of the up-days which have occurred. I am acting according to thethesis thatover the long term the upsexceedthe downs, but Imust catch them all by staying pat and staying in.

Good luck everybody.

Dave

 

[Birchtree]

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DaveM,

I know you realize the pretty girl S fund is now$.40 lighter than two weeks ago.If I had your money - why not throw a dime her way at these lower prices? Even if it is not the exact bottom of her mini correction she sure looks to have a better valuation now at $15.64 than $16.04.

Dennis

 

[Dave M]

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Buying 500 more shares is an idea; it would amount to just 10% of my reserve.But while it has fallen the most, the S-fundalso rose the most in the first place. It gave back a lot but not nearly all -- on July 1st I bought a bunch at $15.12so S-fund at $15.56 isn't all that attractive. On Thursday or Friday of this week I will buy $300 worth of C and S both, automatically, whatever the price.

Here's a question: How would I arrange it so that the purchase of the new S-fund shares is the only transaction, if I decide yes? Calculate the new percentages for G and S,leave C and I unchanged?

Dave

 

[Birchtree]

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DaveM,

Exactly - you are on to something. Now what if at the end of August the pretty girl is back to $16.04 or a little higher with the general market move providing we get one.

A price of $15.64 would definitely look cheap. That dollar cost averaging sure is a great way to make buys. Thanks for the demonstration.

Dennis

 

[Dave M]

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I made a buy today and went to 35G 26C 26S 13I. I thought it best to preserve my percentages so as to accord with my allocations which are in proportion of 2-2-1, C-S-I.

Taking pricing into account, thisrepresents an increase inshare-count of 9% in C, 9% inS and4% in I, afterincludingthe automatic bi-weekly purchase which takes place this week.G-fund wentfrom 40 to 35,a 12% decrease.

All things considered, my net asset value remainsat par over the last six weeks but my share-count has just increased, augmentingfuture profitsby a weighted mean of 7%. Me for diversification.

Dave

 

[Dave M]

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Fishhog, welcome to TSPtalk. Let's not clutter the other thread with talk; after a while, you will learn the set up here.

This is a diversesite with many talented amateurs and you will receive many different replies to your questions. Since only you know your situation, only you can answer them in the end. My views have changed over time.

I have minimized my current expenditures and am using those funds to maximize my contributions to my TSP account, including max over-50 catch-up. That makes 15% plus $4000 plus 5% match for about 25% of my base pay.I will use raises and bonusesto reach the new ceilings which will go into effect after the first of the year.

Now what to do with it? I choose not to trade it around a lot. InsteadI haveestablished percentages for allocating my new money and I follow those percentages when making purchases. I make purchases from the 'cash' account = G-fund.

Note that I do not refer tosales, only to purchases. I intend to sell the day I cash out the account and roll it into my IRA, not before. In five years I will be eligible; I'll see where I stand at that point and decide what to do then.

I experiencepain when prices decline and they start taking money away from me. I'm shoveleing it in there and sometimes it just seems toevaporate. But in the end, prices always rebound. Today's price is irrelevant if I'm not selling today. Right? Instead I work on increasing the share-count, the number of shares I own, and I rely on time to do the work for me.

You too should be able to reach the contribution limits. You have 17 years to spend accumulating shares. You might find the end result a little staggering. I betyou never thought you could be a net-worth millionaire. Good luck!

Dave

 

[Dave M]

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From back in June: "What I am going to do is go through my records and see just how much money I have contributed over the years, how much is matching, and how much is growth on the whole kitty. This will show, I believe, that the portion of the total balance in my account which actually came out of my pocket, is about 1/3 of the total."

Mission accomplished. In search of something else I came across the missing data. It turns out that my own money represents about 40% of the total. Matching funds and intrinsic growth account for 60% of the net asset value and hence exceed my contributions by 50%.

The dollar-difference is widening. This is the wedge-shaped area between the two curves on my graph, Balance and Contributions. Using my estimate of future contributions which is pretty closely known, I can come up with thedollar-total which will pertain when I hit The Wall in 2010 -- my total lifetime contributions in dollars. This I can use to make an estimate of the 2010 balance by using the wedge.

The answer confirms previous estimates. If I continue to have earnings and matches that exceed my contributions in 60-40 proportion, and that ratio applies in 2010, I will make my goal and to spare. If the ratio slips to 55-45, I will just make it.

Right now I have 35% of the balance in the G-fund. I think I'll call that "My Money."

Dave

P.S. Itamused me to learn that my contributions this year will equal the sum total of all my contributions for the first 6 years. In the year 1, 1987, I contributed less money than I do in one pay period these days. *smile*

 

[Dave M]

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Here is a link to a site I found very helpful while remaining light and even amusing. For one thing, it has convinced me of the value of periodic rebalancing.I am going to rebalancemonthly and see what happens.

That means I will always be close to 35G 26C 26S 13I dollar-wise but the share-count will fluctuate in each fund in accord with changes in prices,keeping risk under control.

http://www.efficientfrontier.com/ef/996/rebal.htm

Dave

 

[Dave M]

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...which means I must revise my thoughts about share accumulation. And I should also get my contributions into the same proportions.

There are three more trading days left in the month. Assuming more flat-to-down results, I will be selling a few shares of G-fund and buying more shares of CS&I. As there is also a payroll contribution coming this week, I will wait until that shows up, THEN rebalance.

Dave