Few Q's to help me better understand TSP

[Hybrid93Hatch]

I would like to get a better understanding of how the TSP works to make sure I am making the right choice(s)

Say I have 10 shares of stock in the "I" fund with a value of $20 each. This gives me a total of $200 in value. Then the market takes a hit and the value of each share is now cut in half to $10 a share.

1) I still have 10 shares of "I" fund stocks with the downfall, right?

2) If so, there any time where you lose actual stock quantities?

I have always heard by low / sell high:

2) How do I by low? -- Would that mean to put money into the "I" fund when the value is low in value? Do you leave the money in the "I" fund once purchased or are you to immediatly move it to a safe or safer option such as "G" with a not so good market?

Read this from another post on the board:

Remember, you never lose until you actually sell.

What is meant by selling? Would moving funds from "I" to "G" be considered selling?

I think that should be enough for me to get a better understanding.

Thanks for any help!

 

[ATCJeff]

I would like to get a better understanding of how the TSP works to make sure I am making the right choice(s)

Say I have 10 shares of stock in the "I" fund with a value of $20 each. This gives me a total of $200 in value. Then the market takes a hit and the value of each share is now cut in half to $10 a share.

1) I still have 10 shares of "I" fund stocks with the downfall, right?!

Yes

2) If so, there any time where you lose actual stock quantities?

Only when you sell.

I have always heard by low / sell high:

2) How do I by low? -- Would that mean to put money into the "I" fund when the value is low in value? Do you leave the money in the "I" fund once purchased or are you to immediatly move it to a safe or safer option such as "G" with a not so good market?

Yes and moving is the same thing as selling. You get rid of your I fund shares and buy G fund shares.

Read this from another post on the board:

Remember, you never lose until you actually sell.

What is meant by selling? Would moving funds from "I" to "G" be considered selling?

Yes

I think that should be enough for me to get a better understanding.

Thanks for any help!

 

[Hybrid93Hatch]

Thanks for your reply.

So, with the "I" fund dipping down really low, it would make sense to buy as many "I" fund shares possible (100%)?

I have 100% of my future contributions going to the G fund. I have just under 20 years before retirement if that matters.

Thanks again for the help!

 

[Show-me]

Jeff nailed it, buy low is buying right now. Set your contribution as high as you can stand and automatically be buying with every paycheck. Dollar cost averaging (DCA) is the best way to beat the market back.

 

[james_smith]

I would like to get a better understanding of how the TSP works to make sure I am making the right choice(s)

Say I have 10 shares of stock in the "I" fund with a value of $20 each. This gives me a total of $200 in value. Then the market takes a hit and the value of each share is now cut in half to $10 a share.

1) I still have 10 shares of "I" fund stocks with the downfall, right?

Yes.

2) If so, there any time where you lose actual stock quantities?

No. The number of shares you have is irrelevant. Bringing up shares confuses the issues. The number of shares is irrelevant.

What is relevant is the return (and also the risk). Just think about the return and forget about shares.

I have always heard by low / sell high:

2) How do I by low? -- Would that mean to put money into the "I" fund when the value is low in value? Do you leave the money in the "I" fund once purchased or are you to immediatly move it to a safe or safer option such as "G" with a not so good market?

"Buy low sell high" sounds good, but it is bad advice. This bad advice is given to trick people into staying in stocks. Because if more people sell, stock price would fall even more.

Just think about the return. When the return is low / negative, get out. When the return is high, get in. Why would you want to be in stocks? Stocks are losing money at about 50% per year. Look for a fund that's gaining money (hint: F). When and if stocks start earning money, then you might want to consider them.

"Buy low sell high" does not work simply because after prices drop and are "low", they tend to drop even further and be even "lower". No one can no that a particular point is "the low" until long after it has been passed.

Consider the returns and the risk. Or, if you don't want to do the work, sign up for a good newsletter that does those things. I've been with Peaceful Gains for a couple of months now. That's what they do, and I am very happy with them. I've finally made some money after all the market craziness / news hype.

Read this from another post on the board:

Remember, you never lose until you actually sell.

That is not true. It is a completely false statement. Gains and losses are calculated daily. You can bury your head in the sand and pretend that you are not losing money, but that does not mean that you are not actually losing money.

 

[Hybrid93Hatch]

I've been meaning to revisit in response to your post. It definitely has my attention as it seems I am making a bad investment choice according to your reply.

Just think about the return.

I don't plan to cash in my TSP for at least 20 years. Why would I care about the return at this point in my career since I am only "buying"?

When the return is low / negative, get out. When the return is high, get in.

Say I am investing $200 each pay check into the TSP:

Check 1 - "I" fund is $20 p/share = 10 shares purchased.

Check 2 - "I" fund is $10 p/share = 20 shares purchased.

I decide to sell with the "I" fund at $30 p/share. Which shares will bring me more $$$$? Check 1 or Check 2?

Why would you want to be in stocks? Stocks are losing money at about 50% per year. Look for a fund that's gaining money (hint: F). When and if stocks start earning money, then you might want to consider them.

Considering I have at least 20 years before I will sell, didn't think share value was relevant at this time.

"Buy low sell high" does not work simply because after prices drop and are "low", they tend to drop even further and be even "lower". No one can no that a particular point is "the low" until long after it has been passed.

The market is like a roller coaster as it goes up and down. This is probably not the last hit the market will take, but it has always bounced back. No one can say where the maket will be in 20 years, but I am willing to take the risk and say all the funds will reach new heights sometime in the future....

That is not true. It is a completely false statement. Gains and losses are calculated daily. You can bury your head in the sand and pretend that you are not losing money, but that does not mean that you are not actually losing money.

I read in an article it's not money until you sell. Up until that point it's a figure. Shouldn't we be happy to buy "I" fund stocks at a low $10-12 p/share if the "I" fund bounces back to $20+ p/share where it was? Maybe it hits $30 p/share in 20 years....

 

[Birchtree]

93Hatch,

You are oin the right track to consider the potential of accumulating shares when they are cheap - the more shares the more comfortable retirement. Dollar cost averaging is the right strategy. Your dollar today buys you almost twice as many shares as a year ago because the pricing is at lower levels - this however will not last because cycles come and go and DCAing is constant - autopilot is a great mechanism. But first allow time to learn before you churn. Once you accumulate tens of thousands of shares you can really make a few extra dollars as a timer.