Making money with buy and hold

[Cashflow911]

I have been lurking the boards daily for the last two months trying to learn this madness. If I were to start buying into C, S, I and holding them do we make money off the shares (Dividends) even if were in the red on purchase price. I guess what I'm asking is if I were to dollar cost average into C-fund and hold onto them besides accumulation of shares does owning them make money? Or do you have to move around Buy low sell high to make %

 

[tsptalk]

Welcome Cashflow911. If the share prices move up after you've bought them, you make money. If they go down in price, you lose money. Dividends paid to the funds are reflected in the share price.

I hope that helps.

 

[Cashflow911]

Got it so the only way to gain on increased fund prices is to sell at one point then buy back in at a lower value. I understand that no loss in share prices is really a loss until the time you sell but without taking in to account our pay contributions the only way to increase your TSP is to buy lower then sell higher. Is that why so many on this board move in and out of the funds they are playing to build off a share gains.

 

[Birchtree]

Your account will increase in value along with the increased value of your index shares. As an example the C fund move from $8 to $16 a share would provide a nice gain. If you had accumulated 20,000 shares you'd be up $160,000 above your initial investment. Use dollar cost averaging to your benefit.

 

[goforit]

"Is that why so many on this board move in and out of the funds they are playing to build off a share gains."

your question above is how i understand it too but i am a novice at this but been in TSP for 20years and have done in my words ok but need to do better. birchtree did explain well. to me the more shares you have the more your money increases and decreases as the share prices do the same.

 

[tsptalk]

Got it so the only way to gain on increased fund prices is to sell at one point then buy back in at a lower value.

You don't have to sell to realize a gain or loss. The value of your account will move up and down in unison with the value of the prices of the shares you own.

I understand that no loss in share prices is really a loss until the time you sell but without taking in to account our pay contributions the only way to increase your TSP is to buy lower then sell higher. Is that why so many on this board move in and out of the funds they are playing to build off a share gains.

I don't really go for that line of thinking. If your account value goes down, you have less money in your account, whether you sell or not. On our Autotracker, the folks with positive returns have increased the value of their account (without taking into consideration any additional deposits) and those with negative sign in front of their return have less money in their account.

For tax purposes in a personal account, you don't have a gain or loss until you sell, but for all other purposes, you do.

Is that why so many on this board move in and out of the funds they are playing to build off a share gains.

The reason many of us trade is because the markets can move up, down, or sideways. We try to avoid the downs, and catch the gains. The S&P 500 has a negative return going back 11 years. The only way to beat the market is to be out of it when it goes down. If the market moves sideways for the next 10 years, there will be a lot of very disappointed buy and hold investors.

Good luck!

 

[Steadygain]

Tom,
Just a little reminder:

Friends don't let Friends.....





Drink and Drive

 

[Birchtree]

I believe that any income that is provided by the individual stocks in an index goes toward paying administrative costs - that's why you can trade comission free within TSP. They'll probably never tell you how much they take in - but it covers overhead.

 

[FundSurfer]

I believe that any income that is provided by the individual stocks in an index goes toward paying administrative costs - that's why you can trade comission free within TSP. They'll probably never tell you how much they take in - but it covers overhead.

Not at all. Administration cost is the same to all regardless of the fund you are in. Dividends are reinvested and thus increase the value of the fund. Tom had it right.

To add to the description of what happens a little. A person who is making IFTs is seeking to avoid downturns in the market by switching from one fund where they anticipate a downturn to another fund where they anticipate the fund to go up. Thus they will have increased rates of return. However, it is easier said than done. If you look at the autotracker results for last year, you will see some folks with some incredable rates of return and some poor rates of return (Best was +35% and worst was -17%).

 

[Cashflow911]

Looking at the past 5 year and 10 year yearly averages on TSP.gov if you only had one fund invested, the F-Fund would of returned the most with 5.93% at 5 yrs and 5.91% at 10 yrs. The other funds seem to have more up potential but you would have to move out of the fund to miss the downside. Is that correct thinking?

 

[Silverbird]

The problem with buying and holding stocks and not watching at all where things go: you would have ridden the dot com downturn in 2000-2001, erasing any gains from around 1995 - 2000. A similar not so fun ride would result if you had held on through the housing bust. You would have been better off watching what was happening in 2000, and jumped into 100% G, and then gotten back in after the mess, and ditto for 2008-2009. That's an extreme example, but you would be surprised how many people I know who rode C all the way down, some both times.

You have to at least gain "G" each year, or inflation will eat your money, so you do not want to ride those huge downturns all the way down if they last for months. But even G is just treading water.

 

[Cashflow911]

I guess this is why I was asking if we would get a share dividend for owning the share regardless if you bought at 20.00 and it's at 10.00 like owning a CD. That would take away some of the risk in share prices falling for long term holding. The L-funds don't seem that bad for a person that has no clue what to do but I have 2 1/2 years with the BOP sitting in G-fund so around 18 years to go so I got to go hard..... Just trying to not waste more years with a huge learning curve.

The problem with buying and holding stocks and not watching at all where things go: you would have ridden the dot com downturn in 2000-2001, erasing any gains from around 1995 - 2000. A similar not so fun ride would result if you had held on through the housing bust. You would have been better off watching what was happening in 2000, and jumped into 100% G, and then gotten back in after the mess, and ditto for 2008-2009. That's an extreme example, but you would be surprised how many people I know who rode C all the way down, some both times.

You have to at least gain "G" each year, or inflation will eat your money, so you do not want to ride those huge downturns all the way down if they last for months. But even G is just treading water.

 

[david.alan.williams]

Looking at the past 5 year and 10 year yearly averages on TSP.gov if you only had one fund invested, the F-Fund would of returned the most with 5.93% at 5 yrs and 5.91% at 10 yrs. The other funds seem to have more up potential but you would have to move out of the fund to miss the downside. Is that correct thinking?

Yes, that's correct. It just takes a little time and effort to do better than the G or F funds (multiple year averages)

D

 

[tsptalk]

Is that correct thinking?

Yes.

Moreover, buy and hold always looks better in a bull market and market timers are less effective vs. the indices. This current market is a perfect example.

It's during the downturns that the timer has his day. Why be a sitting duck in a bear market? But as Fundsurfer said, it is easier said than done.

 

[jpcavin]

I guess this is why I was asking if we would get a share dividend for owning the share regardless if you bought at 20.00 and it's at 10.00 like owning a CD. That would take away some of the risk in share prices falling for long term holding. The L-funds don't seem that bad for a person that has no clue what to do but I have 2 1/2 years with the BOP sitting in G-fund so around 18 years to go so I got to go hard..... Just trying to not waste more years with a huge learning curve.

Cash, the easiest thing to do is just follow the allocations of someone who is making money.

 

[Cashflow911]

I figured this was a better market than normal looking at last and this years returns so I haven't been around the market long enough to know a normal one. I went back to G last month trying to make 2% on the Friday Egypt went crazy and lost a couple percent. I was waiting while stocks kept rising to put my money somewhere so I started reading all the account talk pages and decided to pull the trigger and dove back in. This thread was to learn my next step LOL I feel like I am swimming with Sharks and I'm the CHUM

jpcavin you are 100% right and from reading the forum I am greatful for the type of poeple that are here.

Yes.

Moreover, buy and hold always looks better in a bull market and market timers are less effective vs. the indices. This current market is a perfect example.

It's during the downturns that the timer has his day. Why be a sitting duck in a bear market? But as Fundsurfer said, it is easier said than done.

 

[Birchtree]

Your objective in your early years in TSP should be geared toward accumulating shares - that is where you'll make your gains in your later years. Even when the bear shows up keep throwing your contributions into the well of your choice - it's fun to dollar cost average all the way to the bottom buying more shares at a cheaper price - it does however take tons of courage. You just never know when you are at the bottom until you are standing on it - then just keep up the DCAing all the way back up. I say it's fun if you can handle some pain and keep your negative emotions in check - there is always a small blessing in the moments of despair - you're collecting golden prices and more shares and you'll end up way ahead against the G funder sitting in security but loosing potential. I'm speaking from experience as a cycle rider.

 

[jpcavin]

from reading the forum I am greatful for the type of poeple that are here.

You and me both!

 

[tsptalk]

jpcavin you are 100% right and from reading the forum I am greatful for the type of poeple that are here.

Yes, lots of helpful people here, but we really appreciate the questions as well, to help stimulate the conversations.

This was a great topic that seems to come up about once a year, and it is the heart of why TSP Talk is here - to get people thinking about an investment style / approach that suites them and are comfortable with, rather than taking the easy way out of ignoring what many don't understand.

 

[jpcavin]

This was a great topic that seems to come up about once a year, and it is the heart of why TSP Talk is here - to get people thinking about an investment style / approach that suites them and are comfortable with, rather than taking the easy way out of ignoring what many don't understand.

Not to be misunderstood, I am all about educating myself and educating others, but until I learn the ins and out of investing, I am going to follow those that are doing well.