In or Out?

[Jay]

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First, I am glad that the site exists to pass along some information and give us a place to discuss the funds and the market. However, after reading the site for about a month now, I don't understand why you do what you do. If you are going to hide in the tall grass (G Fund) and not participate in the market, why follow the market? You are not involved long enough to do anything useful. Look at your returns versus just being involved. You are getting creamed because you are running after the returns versus getting ahead of them. It would make sense to be invested where the returns are expected to be and then reap the rewards. I haven't seen you do anything but hide from at least the returns of the F Fund that are 3 times better than the G fund. Hoping to see something of use from your technique.

 

[tsptalk]

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Hi Jay -
I can understand your confusion and you probably share my frustration. I'm not sure if you really wanted an answer but I will reply. Yes my returns have lagged this year. But if you have been reading this site for a month I would think you would know what I'm doing. As an extreme example, lets compare fund prices from January 26 to yesterday.

GF C S I

Jan 2610.27 10.07 12.11 13.28 13.41

Mar 0310.3110.1512.0913.2613.31
+ .04+ .08 - .02 - .02 - .10

I expected this consilidation to start about 3 weeks earlier than it it did and that cost me. But since January 26th, my account is up about 1/2% and you can see all of the stock funds are down. I wish I could have taken more advantage of the swings but I have stayed cautious.

Here is something I wrote on January 23.
"depending on your tolerance for fluctuations, you have some choices. You can keep your account in stocks and ride the storm knowing you should have a nice return at the end of the year. You can play the volatility by getting in at oversold levels, and out when overbought. Or you can play very conservatively and stay out of the stock funds until the volatility has subsided, hopefully sitting on some nice gains over last few months."

If you are in it for the longer term and don't want to "hide in the tall grass", I have thelonger term outlook page.

The only way to beat the stock indices Jay, is to be out when they are down. It's too easy to look back and say what I should have done. My strategy is to protect my account when my indicators tell meto. Its likegetting a weather report telling youit's going to rain. You bring your umbrella but it turns out you didn't need it as we only got a little sprinkle. But you were prepared just in case. You'll be able to put that umbrella away soon enough. Give it a couple more weeks.

Thanks for your input. It should trigger an interesting discussion.

Tom

 

[Jay]

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Not throwing stones! Just a little confused. I do understand the movement in the funds and I am glad we have the capability. I even use your Excel tool for my stuff. By the way, thanks! I guess I just haven't settled into a set of indicators of my own and I am trying to decypher yours. The use of the G-Fund instead of a higher returning F-Fund is my main sticking point right now. I know that in certain markets, the G-Fund will do better, but we are talking days, not months and the F-Fund is doing pretty good, unless I am reading it wrong. Always looking for better information, so keep writing!

 

[tsptalk]

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I don't want to pretend that I know a whole lot about bonds but I guess the main reason I have avoided the F fund is the fact that the economy is growing. That means potentially higher interest rates which is usually nota good environment for bonds. Of course looking back, you are right, bonds have done better than the G fundfor the past 6 months or so and I should have done a little better job taking advantage of it.

If you look at my 2003 returns you will see thatI jumped into bonds twice. And this week was my first attempt this year. All three times I lost money. I'm gettinga bit gun shy

 

[Guest]

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Hello, I am new to the government TSP and I have some questions. But first of all, thank you for all your hard work. I appreciate all the analysis, charts, rates of returns, etc. It is kind of funny, but I was thinking of a site like this when I found yours through a google search. I guess you beat me to the punch on that. No problem though.

I would like to piggyback on what Jay was talking about. I, too have been monitoring the site for a month and I was wondering. How long each day does it take to analize all this stuff? Your own numbers show the 20% strategy thouroughly beating your in and out so far this year, and I think I figured out you are behind versus this strategy over a 4 year period or so. Maybe you have gone back in years prior to you getting in and tested this strategy and it outperforms the market? It must take a lot of timeI'm not trying to throuw egg in anyones face, and I am certainly not an investment guru. I'm just curious. Obviously you enjoy what you do, and we definately benefit, so thanks.

MY basic question is: if my payday is every other Friday (like 2/27/03), and I put $500 in the TSP per pay period, when are the shares actually purchased? This is a basic question for my tracking purchases. Please respond, and thanks again.

 

[tsptalk]

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Hi, and thanks for joining us! I'll take your last question first...

MY basic question is: if my payday is every other Friday (like 2/27/03), and I put $500 in the TSP per pay period, when are the shares actually purchased? This is a basic question for my tracking purchases. Please respond, and thanks again.

I actually get my pay on the Monday before the official day which is Thursday but I noticed TSP does not acknowledge my contributions until Thursday. To find out for sure you can either call your personel office or transfer all your money to one fund and have it contributed into another and see what day it shows up. The first one would probably be easier but the second one would be more fun.

A few things in response to your other comments. First, when the market is down, a diversified account will almost always do better than the stock funds. Second, when markets gostraight up you can't beat the stock funds. We've only really had two full years where we had access all five funds to invest in and in those two years I've beaten the 20% diversified account strategy 16.2% to 13.4%. Of course two years of data doesn't really mean much but I'll take it.

The other thing that I mentioned to Jay is that you can not beat the stock funds without being out when the market comes down. Obviously the market has done extraordinarily well the past several months. The only way I could have gotten the same results was to be fully invested the whole time. Since my indicators were telling me to take some caution and get out:X which again is theonly way to beat stock funds,the market flew right past meandit has caused me to lag way behind so far this year. The year is young with ten months left. Eventually we will have a real pullback and hopefully I will have stepped aside andI won't look so silly.

I do enjoy what I do as you mention. I don't take what you are saying as a knock. I love to talk about it. I know what I'm doing but there are many times when it is frustrating. I'm here to help and teach those who need it. It's tough to write up the comments trying not to get too technical but without over simplifying things. I get emails from people who are not sure what I'm talking aboutandotherswho want more than I am giving. Ideally, everyone would read my site,form theirown opinions and invest in a way that makes them comfortable.If someone would rather not take the time to do that they could either diversify or follow what we do. Either way they will do better than tosit in the G fund because they don't know what to do.

So you wanted to make a similar site? I am not currently making money with the site, my expenses are more than the money I make on those ads.Getting traffic is expensive and I will need to generate more traffic to attract decent advertising. I thought about making it a pay site but then I wouldn't be able to help as many people. The other optionwas to rent out some space to people like you, who may have a serviceto offer others. For your feeyou would get a lot oftargetedtraffic that you would have to pay for elsewhere. Just a thought.

Anyway, I'm rambling. Thanks again for your input. I hope to hear more from you on the board.

Tom

 

[Guest]

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Tom,

thanks for the comments. I really do appreciate what you are doing. The thing that you said that is so true is that in order to beat the market averages, you have to be out at the right times and in the F or G fund. I'm curious, what was your strategy during the bear market? Being new to the TSP arena, I would be curious of your response. I have talked to people in the dental service where I work and you are right, some are still stuck in the F and G fund all the time because they are afraid to take any risk. What a shame, because of the gains that were missed last year and part of this year. I will start telling people about your site to help you increase traffic. I really don't have any interest in putting up a site, but would rather help you get some traffic, seriously. Have you ever thought about e-mailing people? Is that kosher, like to get the directory of people with government outlook accounts? Just a thought.

Joel

 

[tsptalk]

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Joel -
I will check out ******.com. I subscribe to somuch already that sometimes it makes my head spin with all of the ideas, and the costs add up.$30 a month could be worth it if they help but that's getting on the high side. By the way if I go to a pay site, which I am trying to avoid, I was thinking more like $5 a month.

Back to the people you know who have beenin the G and F funds since the bear market. Luckily I took advantage of last year's big returns. It's when the market isgetting toohigh that I get scared, not when it's low. That is why, even though I didn't do as bad as some of thestock funds,I did havesome negative years during the bear market. I was buying the dips but the market kept falling.

Like I said, I read a lot of publications and try to form an opinion. My basic strategy is to look at three things first. Psychology, valuation and monetary conditions. I use monetary condition (MZM money supply, interest rates etc) and valuation (Forward price earning ratios and bond yield ratios to PE) as a longer term guide. The longer term outlook determines my bias. I am thinking bullish for the longer term and have been recommending thatthe "buy and holders" get intothe market 100%, possibly raising up a little cash during this consoldiation.

Psychology can be used for a longer term indicator but it fluctuates more and I use it more to get in and out during the year. When people get real excited, I get nervous. When people are getting nervous, I start looking to buy. There are several indicators and sites that focus on this. Obviously for the last two months they have been telling me to be cautious.

During a bull market I would rather be in the market but when conditions as they are today arise (too much bullishness, overbought indicators and resistance in the charts) I sit and wait. Ideally I should have some money in the market when the monetary and valuation legs are strong as they are now, but that is not my style. We have a luxury that a mutaul fund manager doesn't have. At any given time, we can sell everything and have no tax consequences. A mutual fund manager has hundreds of millions, if not billions of dollars worth of stock that he can not possibly unload quicky and there are rules against it. Plus they incur capital gains on the sales. I don't know if it helps me or hurts me be I prefer to get totally out when things are less than ideal.

In a bear market (monetary and valuations are not ideal) I do the opposite. I like to sit on the sidelines and wait for excessive selling (oversold) conditions and take a stab at the stock funds here and there.

I don't want to over load you here. Thanks for spreading the word about the site. Word of mouth may be my strongest tool to gain readers.I really want to avoid too much aggressive advertising such as emails or pop-ups. That leaves a bad taste in apeople's mouths. I even hate to put those banner ads on the site but I have to pay the bills some how. Maybe $5 a month and no ads might be the way to go. I'll have to play it by ear and ask the readers.

Take care,
Tom

 

[Guest]

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Thanks for the info

Joel

 

[melchman]

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I just found this web page today...3/6/04. It's all new. I will be following along for now.



Thanks for all your hard work.

melchman

 

[tsptalk]

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Welcome melchman!