Long Term Tally

[rokid]

Ayla,

FYI.

Old Timers (2 full years of posting) - average 7.54% for 2007

New Timers (1 full year of posting) - average 6.97% for 2007

Old "buy and holders" - average 8.44% for 2007

In addition, consider "survivor bias". Most TSPTalkers who are under performing, lose interest and stop posting. On the other hand, those who are doing well, continue to post. -----Jim

 

[tspgo_com]

Thank you much for the Long Term Comparison reports and for the analysis of the data. Great job!

 

[ayla]

Ayla,

In addition, consider "survivor bias". Most TSPTalkers who are under performing, lose interest and stop posting. On the other hand, those who are doing well, continue to post. -----Jim

Thanks for the stats. I don't agree totally about those who stop posting. In some (or many) cases, I'm sure you are correct but I think on the opposite end, for those who are doing well and who really believe they have their strategy worked out well and don't have a strong desire for the social network aspect of tsptalk, I believe they also lose interest (and may not want to share their moves, LOL).

I'm hoping I will be in this latter category if my latest strategy works out as well as the back testing indicates. I will probably request then that I no longer be tracked. Of course if TSP starts limiting IFT's, then that also will be a reason for me to no longer be tracked since I will move my dollars to a private broker.

 

[rokid]

Ayla,

I actually hope you are right. Some have stopped posting and gone on to creating their own advisory services. However, others have left when they were at the bottom of the tally.

Good luck with your strategy.-----Jim

 

[ayla]

Ayla,

I actually hope you are right. Some have stopped posting and gone on to creating their own advisory services. However, others have left when they were at the bottom of the tally.

Good luck with your strategy.-----Jim

Another point is that there are many many more lurkers to this site than there are registered members and to reduce it more, there are many more registered members than those who are participating in the tracker.

My point is that those who have read THE MILLIONAIRE NEXT DOOR know that most millionaires don’t drive status cars.

The same goes for here, I think. Those who are really the most successful (for the most part though of course there are exceptions) are not flaunting it by having their moves tracked and obtaining the top of the list rank.

(Not to diminish Griffin who I think is great but who participates mostly, I think because he gets more satisfaction from teaching than from winning, though I'm sure he isn't turning away his successful returns anytime soon, LOL)

And another point, IMO, people participate here primarily for the social network benefits (of course I'm talking here about their participation after they become more educated about FV's and "cross trades" , cut offs for IFT transfers and what indicators are helpful, etc, basic newbie stuff but still necessary to learn for many of us who have had no idea).

So using the tracker results to extrapolate about all TSP members (most of whom are not interested in participating here, mainly because they are too busy, LOL) is not logical.

 

[Miss_Piggy]

I’ve been a lurker.
I’ve been a participant.
I’ve been a lemming.
I’ve been a gambler.
I’ve been a learner (tried).
I’ve been a winner and a loser – mostly loser.
This year I’m praying for strength to Buy & Hold – my New Year’s Resolution.
Any prayers appreciated.

 

[rokid]

So using the tracker results to extrapolate about all TSP members (most of whom are not interested in participating here, mainly because they are too busy, LOL) is not logical.

I'm just comparing the results of the people who are being tracked. I am not extrapolating the results to TSP members as a whole.

However, the tracked, TSPTalk market timers as a whole are under performing the two passive investors in the 2007 Tally. They are also under performing most of the L Funds. This also appears to be true over the 2-3 year tally. It also appears that newbie vs. seasoned timer doesn't make that much difference.

This result is in line with the vast majority of academic research results. Academic research shows that it is very hard to consistently beat the market over a reasonably long period. Buffet has done it. Peter Lynch has done it. David Swenson has done it. Interestingly, all of them recommend that the average investor establish a diversified, passive asset allocation that is in line with their risk tolerance and then leave it alone except to periodically rebalance, i.e. "buy and hold".

However, since most studies show "buy and hold" triumphs "after costs", I was interested to see whether or not "costless" market timing, i.e. IFTs are free, would prove superior to buy and hold. Although I'd be the first to admit that the Tally is not a valid study, it does suggest that the approach recommended by the vast majority of finance academics and many of the most successful professional investors on the planet has merit. At this point, for me, the burden of proof is on the market timers. Are they good or are they just having a string of good (or bad) luck? Investors like Griffin and Pyriel may just be very good. However, you can't follow them if they stop posting.

In the past I've graphed the Tally returns. For most of 2007 the returns have followed a normal, i.e. random, distribution. In other words, approximately half of the returns are greater than average and half are less than average and the mean and the median are equal.

Finally, unlike Birch, I have not knowingly ridden a passive allocation from the top to the bottom and back again without bailing (I rode it, I just was comatose:laugh. Therefore, I'm gathering evidence that the "buy and hold" approach is best for me so that I don't panic at just the wrong time and sell low and buy high.

 

[ayla]

Apologies, rokid. Didn't mean to put you on the defensive. But reason I'm being persistent in not letting this drop is because I have no doubt that the TSP board is reading whatever they can here that might support their positions and your position is probably pretty much in line with theirs.

And yes, I have heard much the same about the "buy and hold" philosophy and I still have not decided never to consider this but I must say (and not necessarily to you but to anybody), these opinions by the "experts" shouldn't force rules on those of us who want to try another path especially if we are willing to pay our way. Buffet had to learn from somewhere. And yes, luck has a lot to do with it and what if I want to hope I might have the same luck that Buffet probably did at some point?

I think there is a better way to solve this problem about the board wanting to limit IFT's (again) by moving forward rather than backward. Let's hope they or some other group that can influence them are smart enough to find it without going backward.

My biggest issue is that with the proposed new limits, this will definitely restrict the numbers of members who might otherwise actually try to understand more about how the stock market works. This is what gripes me the most. Please don't implement rules that hinder or discourage people from learning and making mistakes while they are doing it. I believe the white collar corruption we have seen on the increase recently is because of apathy by the share-holders (largely though not totally of course). I believe the new proposed plan by the TSP board to limit IFTs will perpetuate more apathy, something we DON'T need.

One could say you can learn without risking your real dollars. But as we all know, when there is no REAL incentive to improve (such as your own dollars), it doesn't happen as effectively. I remember the corrections last year and this year since I've been dabbling with my returns. I remember many of the political events which led up to them. I wouldn't have any memory of these if I was a "buy and holder" and my interest in understanding the political ramifications of the decrease in the value of the dollar is quite high, something that would never have happened if I were "buy and holder". I even know the date of the next Federal Reserve meeting. Not too shabby for someone who didn't have a clue less than two years ago.

Still a long way to go but I want to do it "my way", something I thought was usually still allowed for the most part in this country as long as I don't hurt anyone else or cause anyone else additional costs.

 

[nnuut]

I'm with you Ayla! I do it MY WAY! View attachment 2736

 

[rokid]

And yes, I have heard much the same about the "buy and hold" philosophy and I still have not decided never to consider this but I must say (and not necessarily to you but to anybody), these opinions by the "experts" shouldn't force rules on those of us who want to try another path especially if we are willing to pay our way. Buffet had to learn from somewhere. And yes, luck has a lot to do with it and what if I want to hope I might have the same luck that Buffet probably did at some point?

No apology required. We haven't had a spirited "buy and hold" vs. timing debate on TSPTalk for a while.

My problem, and I assume the problem of many new investors, was to decide how to invest in the face of competing claims. Basically, for me, it comes down to accepting what the market offers. "Experts" claim that over time that approach will achieve the best results.

On the other hand, timers are not willing to accept what the market offers. They want to do better. Undoubtedly, some do better. However, have they done better because of skill or luck? Alternately, some do worse than the market, i.e. lack of skill or bad luck?

Since I don't have 30 years to figure this out, I decided to believe the experts and gladly accept what the market offers. I don't need more and I don't want to lose considerable amount of money I have (at least for me) pursuing a high risk strategy - my wife would kill me! Plus, I'm lazy!

Re: the IFT question. I doubt the TSP board can show a cost impact of IFTs at this point. I recollect that they claimed that the nightly rebalancing of the L Funds didn't have a cost impact because they could just move the fund allocations around in the giant TSP pot without actually buying or selling securities. CPU cycles aren't expensive.

However, if market timing does catch on in a big way, it seems likely that it would generate costs. I think the TSP Board is engaged in a preemptive strike.

 

[ayla]

However, if market timing does catch on in a big way, it seems likely that it would generate costs. I think the TSP Board is engaged in a preemptive strike.

Totally agree. I've learned that I'm not that special. If I really want to do something or try something, there are usually lots of others who want the same thing. I predict there will be a huge herd of others who want to be able to trade more frequently and I believe they will have a much louder voice than ours right now. So either now or sometime later. I'm hoping now. Seems like changing back and forth and back and forth has a lot of overhead. Why not just put in a system that will fulfill future requirements now? (It's called having "vision" I believe.)

And as Tom suggests, if they set up a trading fee (that is reasonable), they will have years ahead to collect from all those who will also want to trade frequently. (Hoping they make note that trading fees are going down "on the outside" so no reason to charge $500 per trade., IMO)

I would suggest $500 per year for unlimited trading privileges which would cause newbies to be pretty serious if they wanted the privileges. Also, they wouldn't be trading frequently as new hires, probably. And also, a yearly "frequent traders club fee" might be easier to implement software wise rather than per individual transaction.

Seems like they could use the existing "front end" i.e. unlimited trading that would allow login ids that belonged to those who have paid their yearly fee and another front end for those who haven't that would use the system of limited trades they want to implement in March.

So very little new over what they have proposed except for validation of the ids for those who have paid annual fee. The "backend" could be the same as it is now. Don't see why it would have to change. Guess they probably don't need another software engineer, though.

Crossing my fingers...

 

[wv-girl]

"Guess they probably don't need another software engineer, though." Disagree Ayla, I think that is EXACTLY what they need, cause their 'cost estimates' of $500 per person is totally off the scale. That was just an intimitation factor, if you ask me.

 

[Show-me]

Now remember Ms. Ray singled out the 323 participants that are trading $250,000 or more in one trade. Point: $500 may not cover their daily trades for a year.

 

[Ed]

No apology required. We haven't had a spirited "buy and hold" vs. timing debate on TSPTalk for a while.

My problem, and I assume the problem of many new investors, was to decide how to invest in the face of competing claims. Basically, for me, it comes down to accepting what the market offers. "Experts" claim that over time that approach will achieve the best results.

On the other hand, timers are not willing to accept what the market offers. They want to do better. Undoubtedly, some do better. However, have they done better because of skill or luck? Alternately, some do worse than the market, i.e. lack of skill or bad luck?

Since I don't have 30 years to figure this out, I decided to believe the experts and gladly accept what the market offers. I don't need more and I don't want to lose considerable amount of money I have (at least for me) pursuing a high risk strategy - my wife would kill me! Plus, I'm lazy!

Re: the IFT question. I doubt the TSP board can show a cost impact of IFTs at this point. I recollect that they claimed that the nightly rebalancing of the L Funds didn't have a cost impact because they could just move the fund allocations around in the giant TSP pot without actually buying or selling securities. CPU cycles aren't expensive.

However, if market timing does catch on in a big way, it seems likely that it would generate costs. I think the TSP Board is engaged in a preemptive strike.

Here is my view for whatever it's worth of "buy and hold" versus "market timing" which has, frankly, changed over the years of investing.

It reminds me of the "buy term and investment the difference" debate which revolutionized the industry some years ago or the "passive versus active" investment approach using index funds, namely our own TSP funds.

In my earlier years and probably rightly so, I was very aggressive with my investments. When TSP was first introduced with index funds I felt it handicapped my investment style. As time went on, I would be hard pressed not/not to have index funds make up a large core of my investment holdings. And, as I get older I'm leaning to more of a KISS and auto pilot approach since I'm losing my passion, or hobby, of accumulating wealth

Which strategy is better? As one investment guru puts it: "forecasting has two approaches---lucky and wrong." And, believe me I've had my share of being on the wrong side.

I believe it boils down to this if you believe in the Divine. All that we have are gifts from God and as good stewards we should make good with his gifts. So, if God gives you the wisdom to use one investment approach over another and allows you to benefit, thank Him and do good with you money (that part is your personal choice).

Thank you for allowing me to share my thoughts.

Regards,

Ed (non-practicing CFP and after reading all the articles on TSP Inter Fund Restrictions probably in the top 100 of all TSP account holders in terms of balance---not that this means anything. All this means is that I maximized TSP contributions (employer and employee) and accepted a lot of market risk with TSP asset mixes over the years.)

 

[rokid]

The Long-term Tallies for 14 Dec 2007.

 

[rokid]

Question:

Based on my data, the most successful TSP Talk investment approach has been single fund swing trade, i.e. 100% between fixed income (G&F) and equities (C,S, & I), with an average return of 9.34% YTD. The second best approach has been multi-fund diversified, i.e. passive asset allocation among multiple funds, with a 6.62% return YTD. However, most people being tracked are multi-fund swing trade, i.e. switching between multi-fund positions, with a 5.39% YTD return.

In addition, intuitively, single fund swing trade would seem to be easier to manage than the multi-fund swing trade. Therefore, why do 88% of the TSPTalkers practice the approach that seems, on average, to offer the worst results.

 

[rokid]

Griffin crushed the competition in the 2 year long-term tally leader. Show-me rallied at the end of the year to re-take the 3 year leader position. Congratulations. -----Jim

 

[Show-me]

Rokid,

Thank you for a nice visual. Congrats to all!!!

 

[Pill]

Yes, thank you Rokid!

Those L funds sure don't look that bad.

Funny how some many bad mouth them.

 

[Rod]

Question:

Therefore, why do 88% of the TSPTalkers practice the approach that seems, on average, to offer the worst results.

I believe it's because they feel they are being diversified.

BTW, I belong to the 12% who single fund swing trade most of the time.

I have been thinking of a different approach this year, and that is... you guessed it... to diversify more!