How Do You DCA With A Fixed Account ?

[Stoplight]

Hello, All !

I posed a question about DCA to Birch in his account talk thread....we had a good discussion in which a "noob" like me learned !

I'd like to hear some other thoughts about my question....first, some background :

I quit my Fed job (FERS) after 27 years credit (bought back 4 years of active duty AF time)....I'm too young to draw any of the 3 legs of the FERS retirement program (the Fed pension, the TSP withdrawal, or SS...). So now I'm faced with managing my TSP balance that I left to ride.....

My question is : How do you use a DCA strategy to maximize my TSP balance ? I no longer have a payroll deduction to take advantage of a "typical" DCA approach....what percentage or $$$ value do YOU use to get into or out of this crazy market ???

All comments/advice welcome !


Stop....

 

[ChemEng]

I'm too young to draw any of the 3 legs of the FERS retirement program

Check out IRS rule 72t.

 

[Bullitt]

Always have cash on hand. I would try keep 10-12% in G fund for when market opportunities arise such as the one in 4/07. Sell on the way up and don't try to sell out completely at the top. It's a fools game.

Example using arbitrary numbers. Not a recommendation. Buy shares of I fund on weakness for an average cost basis of 24.18. Set your target and sell some of the shares from I fund on strength until you hit your price target. Let's say your target is 25.25. On up days I'd be dumping a percentage of your position based on market strength on the way towards 25.25.

It's very difficult with TSP because of the NAV and noon deadline but it could work. The current market conditions make it even more difficult as any 'trades' should only be attempted by the most aggressive traders.

I worked my way into being overweight the C fund the past few months by IFTing (mostly from S but also some I) to C. Each IFT consisted of 1-4% of my total.

One of the best methods I've seen on this site is Tom's long term holder's account. I remember he kept something like 15% in G until I think March or April when he bought into equities when everyone else was running for the exits.

Invest with an eye on the long term and a small portion in cash because opportunities will arise that you can take advantage of. The market is not as efficient as many may proclaim it to be. By the nature of your post it sounds like you've got at least a 20-30 year time horizon.

 

[Stoplight]

Check out IRS rule 72t.

Thanks, ChemEng !

I took a brief scan of articles on 72t, and it looks like it applies when you're 55....I'm only 52

I'll reread 'em and see if I'm missing something....thanks for the tip !

Stop...

 

[Stoplight]

Always have cash on hand. I would try keep 10-12% in G fund for when market opportunities arise such as the one in 4/07. Sell on the way up and don't try to sell out completely at the top. It's a fools game.

Example using arbitrary numbers. Not a recommendation. Buy shares of I fund on weakness for an average cost basis of 24.18. Set your target and sell some of the shares from I fund on strength until you hit your price target. Let's say your target is 25.25. On up days I'd be dumping a percentage of your position based on market strength on the way towards 25.25.

It's very difficult with TSP because of the NAV and noon deadline but it could work. The current market conditions make it even more difficult as any 'trades' should only be attempted by the most aggressive traders.

I worked my way into being overweight the C fund the past few months by IFTing (mostly from S but also some I) to C. Each IFT consisted of 1-4% of my total.

One of the best methods I've seen on this site is Tom's long term holder's account. I remember he kept something like 15% in G until I think March or April when he bought into equities when everyone else was running for the exits.

Invest with an eye on the long term and a small portion in cash because opportunities will arise that you can take advantage of. The market is not as efficient as many may proclaim it to be. By the nature of your post it sounds like you've got at least a 20-30 year time horizon.

Thanks for the input, Bullitt !

Sounds like your "unit" is the "what I feel comfortable with...", too

I had a good 1 day all in-next day all out using the I fund. That spoiled me on the gains that can be made by "day trading", BUT my risk tolerance isn't high enough to do this routinely. I'm smart enough to realize I got lucky that day

Now, I'm all in G so I haven't been burned by the markets, but I gotta admit some of the bulls are convincing me that prices are cheap, and I need to get back somehow in the markets...just looking for a logical way to dip my big toe in to make some long-term money without getting burned too bad !

By the way, I always lusted after the Bad Guy's Charger in the movie, rather than the Mustang

Stop...

 

[malyla]

This has been on my mind for a while. I know this thread is old, but I think someone may know what the answer to this contribution question.

If I allocate my biweekly contribution to equal parts in C,S,I (say split $337.5 into buying shares in each fund), what happens when I rebalance my account with an IFT from G to stocks? Are the small amount in the stock funds (from the bi-weekly allocation) sold at the COB share cost and then shares are bought as defined in the IFT (say 100%C)? If that is the case, then doesn't that make DCAing mute as you do not really get to keep those C stocks that you bought with your contribution (possibly at a low stock price) at that price you paid because it is all reshuffled to the new stock price at the time of the IFT?

bought $112.5 C at $10/share = 10 shares or 0.15% of your account
bought $112.5 S at $15/share = 7.5 shares or 0.15% of your account
bought $112.5 I at $16/share = 7.03125 shares or 0.15% of your account
have $74,662.5 in G at $6/share (12,443.75 shares)

Perform an IFT 100% C at $11/share

Does IFT cause all the shares to be sold to buy the C fund at the $11/share price? Even if you could specify less than 1% increments in the IFT, everything would still be sold at the COB share price and bought in the distribution specified in the IFT.

Does this mean that DCAing with our TSP fund is impossible? The DCA method is about gathering more shares in a fund. The only way I can see how to do this is to go to G when C is high (say $13/share), then buy back into C when it is low (say $10/share) etc.... Is the DCA method just a sell high, buy low method and am I correct on what happens when we do an IFT? If so, then it’s an all or nothing DCA method as we can not keep shares at previous cost once we make an IFT.

Thanks.

 

[KevinD]

This has been on my mind for a while. I know this thread is old, but I think someone may know what the answer to this contribution question.

If I allocate my biweekly contribution to equal parts in C,S,I (say split $337.5 into buying shares in each fund), what happens when I rebalance my account with an IFT from G to stocks? Are the small amount in the stock funds (from the bi-weekly allocation) sold at the COB share cost and then shares are bought as defined in the IFT (say 100%C)? If that is the case, then doesn't that make DCAing mute as you do not really get to keep those C stocks that you bought with your contribution (possibly at a low stock price) at that price you paid because it is all reshuffled to the new stock price at the time of the IFT?

bought $112.5 C at $10/share = 10 shares or 0.15% of your account
bought $112.5 S at $15/share = 7.5 shares or 0.15% of your account
bought $112.5 I at $16/share = 7.03125 shares or 0.15% of your account
have $74,662.5 in G at $6/share (12,443.75 shares)

Perform an IFT 100% C at $11/share

Does IFT cause all the shares to be sold to buy the C fund at the $11/share price? Even if you could specify less than 1% increments in the IFT, everything would still be sold at the COB share price and bought in the distribution specified in the IFT.

Does this mean that DCAing with our TSP fund is impossible? The DCA method is about gathering more shares in a fund. The only way I can see how to do this is to go to G when C is high (say $13/share), then buy back into C when it is low (say $10/share) etc.... Is the DCA method just a sell high, buy low method and am I correct on what happens when we do an IFT? If so, then it’s an all or nothing DCA method as we can not keep shares at previous cost once we make an IFT.

Thanks.

Bump!

malyla never got an answer and I've been wondering the same thing but couldn't figure out how to ask the question.

Some federal employees have every share of C, S, and I that they ever bought because they have never rebalanced their account with an IFT. They have truly DCA'd.

Do IFT's negate DCA-ing?