Last Month's Best Fund Method Strategy

[Guest2]

It would appear that your method is calling (G) as the Best Fund
for the month of August as well.

 

[McDuck]

It would appear that your method is calling (G) as the Best Fund
for the month of August as well.

Right

 

[XL-entLady]

So with today's market happenings, unless the order switches again tomorrow, that means that August's LMBF is C???

Day-amn! I'd have never guessed that one! :blink:

Lady

 

[XL-entLady]

August's LMBF strategy pick ends up being G Fund after all. That makes way more sense to me than yesterday's C Fund indication. What a wierd market.

Lady

 

[marcel54]

I'm still 100% G from last month...

 

[malyla]

August's LMBF strategy pick ends up being G Fund after all. That makes way more sense to me than yesterday's C Fund indication. What a wierd market.

Lady

Which just says that if you are going to follow this method, wait until the end of the month to determine the next transfer. There is a pretty good correlation between the bear market LMBF and the bear market position trade of F fund. The problem with the LMBF in a bear market is that on those short bear rallys, the LMBF missed the rally only to go into a loss for the following month due to the previous months signal. That can be very frustrating.

Still trying to determine if and when to use this method I'm thinking of using the monthly strength indicators as a secondary signal.

 

[XL-entLady]

There is a pretty good correlation between the bear market LMBF and the bear market position trade of F fund. The problem with the LMBF in a bear market is that on those short bear rallys, the LMBF missed the rally only to go into a loss for the following month due to the previous months signal. That can be very frustrating.

Still trying to determine if and when to use this method I'm thinking of using the monthly strength indicators as a secondary signal.

I'd never made the correlation between the LMBF and the F Fund. I appreciate incisive comments like yours that add to my knowledge base!

I'm using LMBF as a cross-check to make sure that I'm reading the medium-term market right, and that's the only way I'll probably ever use it. But I think it could have value as a primary fund for people who are ready to move beyond putting everything in an L Fund and walking away, but may not be ready to actively IFT using their own decision-making process. For those folks, it might be a good interim step while they are learning. What do you think?

Lady

 

[malyla]

A friend told me about a TSP-fund IFT-strategy that someone else (person B) told him about. Person B said it performed 5 or 6 times better than any other strategy that he analyzed.

It is a very simple strategy. It consists of: at the beginning of each month IFT into the fund that performed the best the previous month (i.e., at beginning of July IFT into the fund that performed the best during June.)

I back-tested it for the years 2001 thru 2007 (2001 was the first year with all 5 funds.)
Using this strategy over those 7 years gave a return of 114%.
Staying in the I-fund the same years returned 74%.
The S-fund returned 69%.
The F-fund returned 49%.
The G-fund returned 38%.
The C-fund returned 25%.

Supposedly, person B has been using this strategy for several years with success. It seems too simple. But I can see why it would work. And it does take the emotions out of IFTing and it would fit in any restricted-IFT rules that they throw at us.

This strategy could also be back-tested all the way back to the beginning to TSP using the G, F, C funds. I haven't done that yet.

Also, staying in a fund (that performed best the previous year) all year seems to be a very good strategy too.

Of course, all of this is taking the multi-year view.

Attached is the Excel worksheet that I used.

Lady,

The quote is from the first post (redundant, but it puts this method in propective). This method works very well in a bull market but not so well in a bear market. This makes sense as in a bull market at least one of the stock funds is doing well, so at worst you are moving between stock funds. However, in a bull market the return was better if you just left your money in the riskiest stock fund (I fund). It's the bear markets where this no longer works as well.

I put an excel together that shows this. It is in both this tread and in my account talk. There is a direct comparison between the LMBF and other strategies in that excel spreadsheet. Just take into account that it is a small sample set (back testing to 1991). It only shows 1 1/2 bear market returns, but the difference between the LMBF and the capital preservation method (Cycle B&H) is not to be ignored. The problem is determining when a bear market begins and how long it will be.

I hope this continues to be informative I do think it is good in a bull market for beginners, but I'm not sure I would have anyone use it in a bear market.

 

[DrFaustus]

LMBF Report Card:

G Fund: +0.33
F Fund: +0.92
C Fund: +1.46
S Fund: +2.17
I Fund: -4.16

LMBF was in the G Fund for Aug. That puts the YTD LMBF performance at -5.33%

LMBF predicts S fund for Sep

 

[malyla]

LMBF Report Card:

G Fund: +0.33
F Fund: +0.92
C Fund: +1.46
S Fund: +2.17
I Fund: -4.16

LMBF was in the G Fund for Aug. That puts the YTD LMBF performance at -5.33%

LMBF predicts S fund for Sep

LMBF method says G for October. YTD LMBF earnings -15.09%
Last months returns
G 0.31%
F -1.31%
C -8.94%
S -10.32%
I -12.31%

Year to date
G 2.86%
F 0.84%
C -19.25%
S -16.08%
I -27.80%

Being in S fund for Sept lost you ~10%. I'm thinking that bear markets do not allow for the risks on that scale. Currently in F and Sept was not very good for me but it could have been worse.

GL everyone.
Malyla

 

[McDuck]

LMBF method says G for October.

As of cob today, LMBF is beating the stock funds by at least 15% YTD. That's not bad.

 

[McDuck]

August 2008 Fund Returns
G Fund: +0.33
F Fund: +0.92
C Fund: +1.46
S Fund: +2.17
I Fund: -4.16

LMBF predicted the S-fund for September, but it went down 10%.

Since the I-fund was a high negative in August, then maybe it should have indicated to stay in the G-fund. Somebody should back test that.

 

[McDuck]

LMBF method says G for October.

Fund - G Fund F Fund C Fund S Fund I Fund
% Chg mon - +0.20% -1.57% -15.43% -19.21% -15.77%

 

[peterson82]

I am wondering how this strategy would do if we used a Last-Eleven-Business-Days-Best-Fund (LEBDBF), since we have two trades a month.

In panic situations we could still dump the shares into the G-fund.

 

[Silverbird]

Well, in this case, blindly following the LMBF method may not be wise because it would mean cementing your losses from last month?

 

[McDuck]

Well, in this case, blindly following the LMBF method may not be wise because it would mean cementing your losses from last month?

It would have prevented at least a 15% loss this month.

 

[Silverbird]

Wow, ok! Now that's really good.

 

[McDuck]

This month so far LMBFM is beating the C-fund by 11.5%, S-fund by 15.8% and I-fund by 9.6%.

 

[Kentucky]

Can anyone tell me what the LMBFMS is?

I understand the principle, but what do you do, look at last months returns and then invest in those funds? if so, how do you decide how much to put into each fund?

Thoughts and advise are appreciated!

 

[KevinD]

Greg went 100% F at close of business (COB) today using this method.

http://www.tsptalk.com/tracker/tsp_user_record_all.php