Playing the I fund

Sort by newest Sort by date
ebbnflow said:
Wow, the F Fund (+.03 cents) actually beat the I Fund (+.01 cent). The MSCI EAFE was at +.597%, so I guess an FV of -.10 cents went into play. :D
Click to expand...

I need some advise. Because the U.S. stock exchanges close after other international markets, I can understand the application of a negative FV in order to prevent traders in the U.S. markets to take unfair advantage of prices after the markets in Asia and Europe have closed for the day. However, today the U.S. Dollar kept going lower throughout the morning in relation to the YEN and the EURO, and until the closing of European markets. Shouldn't that drop in the dollar have the resulting effect of causing a positive FV for us in the U.S.? I am aware that until 11:30 A.M., the London FTSE, the French CAC, and the German DAX were negative and ended on a negative note. What other factors are being considered or taken into account? Thanks in advance!
 
• There is a risk of loss if the EAFE Index declines in response to changes
in overall economic conditions (market risk) or in response to increases
in the value of the U.S. dollar (currency risk).
• Earnings consist of gains and losses in the prices of stocks, currency
changes relative to the U.S. dollar, and dividend income.
• A significant component of the returns on the EAFE Index (and the I Fund) results from changes in the value of the U.S. dollar relative to the currencies of the countries represented in the index. For example: The EAFE Index earned 13.5% in 2005, but that return reflected an increase in the value of the U.S. dollar (which decreased the return). If the value of the dollar had been unchanged during 2005, the return would have been 29%.
• The EAFE Index is weighted by float-adjusted market capitalization, in which a company’s market value and its weighting in the index are calculated using the number of shares that are freely traded, rather than all outstanding shares.
• Fair value pricing is used by mutual funds when there is a gap between the time the index closes and the time the fund is priced to reflect the index. Fair value pricing was implemented to protect long-term shareholders from short-term traders attempting to profit from price difference between the index's closing price and the price of the fund before it was repriced. While it causes some variation in daily pricing, the variation is generally reversed the next day.
• Fair value pricing in the TSP's I Fund occurs less than 20% of the time. The TSP is meant to be a long-term retirement savings account, not a short term trading vehicle. Mutual funds use fair value, redemption fees, and limits on numbers of trades to prevent market timing activity and the resulting excessive trading costs from hurting the performance of the fund. To date, the TSP has chosen to use only fair value pricing, but that may change in the future.
• Fair valuation ensures that traders cannot "market time" the I Fund by making investment decisions based on the "stale" prices, thus diluting the returns of other participants who invest in the I Fund. Because the EAFE uses the foreign market closing prices to calculate its values, its price change will differ from the TSP's on those days.

With all that Cut & Paste mumbo-jumbo being spilled... Sponsor, your question is complicated to answer at best. There are so many individual factors affecting the final daily outcome of the I fund. Remember, as of 31 December 2005, there are 1,137 individual company's stock covered in the equity markets of 21 countries, affecting our TSP I-Fund. This MB has folks really darn good at calling the I-Fund daily end price. HOWEVER, the I-Fund Fair Value splash is the kicker; those proverbial cannon ball high dive platform jumpers at the local pool that keep the water real choppy, and keep us all from making out the quarters dimes and nickels those jumpers loose from their swimming shorts at the bottom of the pool.

Fair Value is like a box of chocolates... You never know what your going to get. :cheesy:

But, then again... there are some folks real good at guessing the fair value too. :nuts:

Make any sense? :embarrest:

If not... here's a couple of standard MB answer below.
http://www.tsp.gov/rates/fundsheet-ifund.pdf
http://www.tsp.gov/faq/faq4.html#sub6

Good Luck and Investing.
Have a peaceful weekend. :)



sponsor said:
...today the U.S. Dollar kept going lower throughout the morning in relation to the YEN and the EURO, and until the closing of European markets. Shouldn't that drop in the dollar have the resulting effect of causing a positive FV for us in the U.S.? I am aware that until 11:30 A.M., the London FTSE, the French CAC, and the German DAX were negative and ended on a negative note. What other factors are being considered or taken into account? Thanks in advance!
Click to expand...
 
sponsor said:
http://www.bloomberg.com/apps/news?pid=20602081&sid=aWHU.xyImWJU&refer=benchmark_currency_rates
Click to expand...

I was interested to read the info on this link to bloomberg posted by sponsor. I probably missed it but I hadn't yet heard any analysis about what the impact on the I fund would be with the probable raise in interest rate by the Bank of Japan except in this editorial.

========Excerpt from the link <snip>==========
July 7 (Bloomberg) -- Investors should buy the yen because the Bank of Japan will probably raise its benchmark interest rate next week for the first time in almost six years, according to Lehman Brothers Holdings Inc.
=========<snip>===========================

I realize that things are never this simple but does anyone have any thoughts about this impact, whether they think there will be one or not? Could the reference here to "Investors" be referring to us (among others)?
 
Fivetears said:
• There is a risk of loss if the EAFE Index declines in response to changes
in overall economic conditions (market risk) or in response to increases
in the value of the U.S. dollar (currency risk).
• Earnings consist of gains and losses in the prices of stocks, currency
changes relative to the U.S. dollar, and dividend income.
• A significant component of the returns on the EAFE Index (and the I Fund) results from changes in the value of the U.S. dollar relative to the currencies of the countries represented in the index. For example: The EAFE Index earned 13.5% in 2005, but that return reflected an increase in the value of the U.S. dollar (which decreased the return). If the value of the dollar had been unchanged during 2005, the return would have been 29%.
• The EAFE Index is weighted by float-adjusted market capitalization, in which a company’s market value and its weighting in the index are calculated using the number of shares that are freely traded, rather than all outstanding shares.
• Fair value pricing is used by mutual funds when there is a gap between the time the index closes and the time the fund is priced to reflect the index. Fair value pricing was implemented to protect long-term shareholders from short-term traders attempting to profit from price difference between the index's closing price and the price of the fund before it was repriced. While it causes some variation in daily pricing, the variation is generally reversed the next day.
• Fair value pricing in the TSP's I Fund occurs less than 20% of the time. The TSP is meant to be a long-term retirement savings account, not a short term trading vehicle. Mutual funds use fair value, redemption fees, and limits on numbers of trades to prevent market timing activity and the resulting excessive trading costs from hurting the performance of the fund. To date, the TSP has chosen to use only fair value pricing, but that may change in the future.
• Fair valuation ensures that traders cannot "market time" the I Fund by making investment decisions based on the "stale" prices, thus diluting the returns of other participants who invest in the I Fund. Because the EAFE uses the foreign market closing prices to calculate its values, its price change will differ from the TSP's on those days.

With all that Cut & Paste mumbo-jumbo being spilled... Sponsor, your question is complicated to answer at best. There are so many individual factors affecting the final daily outcome of the I fund. Remember, as of 31 December 2005, there are 1,137 individual company's stock covered in the equity markets of 21 countries, affecting our TSP I-Fund. This MB has folks really darn good at calling the I-Fund daily end price. HOWEVER, the I-Fund Fair Value splash is the kicker; those proverbial cannon ball high dive platform jumpers at the local pool that keep the water real choppy, and keep us all from making out the quarters dimes and nickels those jumpers loose from their swimming shorts at the bottom of the pool.

Fair Value is like a box of chocolates... You never know what your going to get. :cheesy:

But, then again... there are some folks real good at guessing the fair value too. :nuts:

Make any sense? :embarrest:

If not... here's a couple of standard MB answer below.
http://www.tsp.gov/rates/fundsheet-ifund.pdf
http://www.tsp.gov/faq/faq4.html#sub6

Good Luck and Investing.
Have a peaceful weekend. :)
Click to expand...

Fivetears,

This is a great post to save for future reference, and I am doing so! I appreciate your fine explanation and know this one will be very helpful to others who attempt investing in international markets. I, for one, started using the I-Fund as an invetment alternative only last month. I have learned much since then, thanks to your input as well as the contributions of others in this thread, who also have come out with their views when I have asked for help. Thanks again!

The above acknowledgement does not mean that I will stop asking questions. Assumptions: From your information I understand that TSP is currently applying only Fair Value pricing. Assuming we continue to have a lower dollar, as predicted by many currency analysts, and that the U.S. economy has a soft landing engineered by the FED in coordination with other G-7 or G-8 nations, should we expect significantly better returns in the I-Fund, or not? In the vicinity, or in excess of the returns you posted above for the EAFE index in 2005?
 
A lower valued USD should give the I fund better returns, unless the USD drops in such a way as to impact the EAFE fund in such a negative fashion that it offsets the effect of a falling doller with lower stock valuations. Then, there is the issue of better returns, but the returns themselves have less value as the value of the USD is lower. It seems overtime, every action has a balancing reaction or consequence.
 
Sponsor,

I think you might be having a little trouble separating the effects of the dollar on the I fund price, and the application of fair value pricing.

The price of the dollar effects the EAFE, and therefore the I fund price, everyday. If the value of the dollar is lower, the return of the I fund will be greater, each time, everytime. To echo Skypilot's response, a falling dollar will always help the return of the I fund, unless it falls so far, so fast as to cause underlying problems. However, even then, a lower will mean the I fund price for the day will be better than it would have otherwise been.

Fair value pricing is something that is done by Barclay's once in a while, not everyday. It may or may not have something to do with the dollar's movement on that day. For instance, yesterday it had nothing to do with the dollar and everything to do with the fact that our markets tanked after noon. Also remember that a price that has been adjusted by fair valuation will be "fixed" within a day or two. The dollar's effect on the daily I fund price is permanent.

Hope this helps,

Dave
<><
 
Wheels said:
Sponsor,

I think you might be having a little trouble separating the effects of the dollar on the I fund price, and the application of fair value pricing.

The price of the dollar effects the EAFE, and therefore the I fund price, everyday. If the value of the dollar is lower, the return of the I fund will be greater, each time, everytime. To echo Skypilot's response, a falling dollar will always help the return of the I fund, unless it falls so far, so fast as to cause underlying problems. However, even then, a lower will mean the I fund price for the day will be better than it would have otherwise been.

Fair value pricing is something that is done by Barclay's once in a while, not everyday. It may or may not have something to do with the dollar's movement on that day. For instance, yesterday it had nothing to do with the dollar and everything to do with the fact that our markets tanked after noon. Also remember that a price that has been adjusted by fair valuation will be "fixed" within a day or two. The dollar's effect on the daily I fund price is permanent.

Hope this helps,

Dave
<><
Click to expand...

I think these exchanges of views are necessary to understand and gauge the performance of the I-Fund. I also believe, that unless an extreme crisis were to happen, we can count on a lower relative dollar for the next few months; and, as a consequence, we will be getting better returns here than in the other TSP Funds.
 
If my memory doesn't fail me, I believe that some weeks ago, someone here mentioned the pseudonym of someone else who had recently retired from government service. Apparently, that person had been a very successful investor in the I-Fund. If someone recalls the name, I will appreciate very much if you can tell me the pseudonym so that I can retrieve and read his/or her posts. This should be a great learning experience for me! Thanks!
 
sponsor said:
If my memory doesn't fail me, I believe that some weeks ago, someone here mentioned the pseudonym of someone else who had recently retired from government service. Apparently, that person had been a very successful investor in the I-Fund. If someone recalls the name, I will appreciate very much if you can tell me the pseudonym so that I can retrieve and read his/or her posts. This should be a great learning experience for me! Thanks!
Click to expand...

Maybe me? Or, maybe not since I haven't posted much lately. I was in the I Fund only one year before I retired, and I'm sitting pat 3 years later. Not complaining with the better than 22% per yr. average return.

By the way, instead of looking at EFA, look at Fidelity Spartan International Index Inv FSIIX. Morningstar just raised its rating to 4 Stars. FSIIX mirrors the I Fund's expenses, and has an identical makeup. In fact, I may soon switch my 6 figure TSP account to an IRA...then switch to a ROTH, once I decide it's time to take the tax hit (that's the sad face part of this post). I may stick with EAFE via FSIIX, and sprinkle on a little EEM and maybe a few other emerging market funds since they've come down a lot in the past couple of months.
 
Last edited:
vethost.com said:
Maybe me? Or, maybe not since I haven't posted much lately. O was in the I Fund only one year before I retired, and I'm sitting pat 3 years later. Not complaining with the better than 22% per yr. average return.

By the way, instead of looking at EFA, look at Fidelity Spartan International Index Inv FSIIX. Morningstar just raised its rating to 4 Stars. FSIIX mirrors the I Fund's expenses, and has an identical makeup. In fact, I may soon switch my 6 figure TSP account to an IRA...then switch to a ROTH, once I decide it time to take the tax hit (that's the sad face part of this post).
Click to expand...

Knowledge is indispensable to success. I don't know if it was you or not, but if I can learn from you it will be a blessing. I haven't yet analysed even this post due to time constraints, but I'll do so in due time. My pleasure!
 
Sponsor, thanks for the kind words. Here's to hoping the intriguing questions and good willed diverse answers posted here throughout TSP Talk become infectious, and continue to spread though each and every forum. I deeply feel we all seek the same...
Retirement financial survival.
United We Stand.

Your follow-on question is a pop fly to center. Since opinions are like belly-buttons...
I "FEEL" an 18% JAN - DEC "ride it out end to end year" return.
But Sponsor, it could be just gas. :embarrest: :blink: :nuts:
sponsor said:
Fivetears,

This is a great post to save for future reference, and I am doing so! I appreciate your fine explanation and know this one will be very helpful to others who attempt investing in international markets. I, for one, started using the I-Fund as an invetment alternative only last month. I have learned much since then, thanks to your input as well as the contributions of others in this thread, who also have come out with their views when I have asked for help. Thanks again!

The above acknowledgement does not mean that I will stop asking questions. Assumptions: From your information I understand that TSP is currently applying only Fair Value pricing. Assuming we continue to have a lower dollar, as predicted by many currency analysts, and that the U.S. economy has a soft landing engineered by the FED in coordination with other G-7 or G-8 nations, should we expect significantly better returns in the I-Fund, or not? In the vicinity, or in excess of the returns you posted above for the EAFE index in 2005?
Click to expand...
 
Fivetears said:
Sponsor, thanks for the kind words. Here's to hoping the intriguing questions and good willed diverse answers posted here throughout TSP Talk become infectious, and continue to spread though each and every forum. I deeply feel we all seek the same...
Retirement financial survival.
United We Stand.

Your follow-on question is a pop fly to center. Since opinions are like belly-buttons...
I "FEEL" an 18% JAN - DEC "ride it out end to end year" return.
But Sponsor, it could be just gas. :embarrest: :blink: :nuts:
Click to expand...

Even if it should only be GAS, I appreciate your good-willed opinion!
 
vethost.com said:
Maybe me? Or, maybe not since I haven't posted much lately. I was in the I Fund only one year before I retired, and I'm sitting pat 3 years later. Not complaining with the better than 22% per yr. average return.

By the way, instead of looking at EFA, look at Fidelity Spartan International Index Inv FSIIX. Morningstar just raised its rating to 4 Stars. FSIIX mirrors the I Fund's expenses, and has an identical makeup. In fact, I may soon switch my 6 figure TSP account to an IRA...then switch to a ROTH, once I decide it's time to take the tax hit (that's the sad face part of this post). I may stick with EAFE via FSIIX, and sprinkle on a little EEM and maybe a few other emerging market funds since they've come down a lot in the past couple of months.
Click to expand...

Vethost,
As a follow-up, I saved FSIIX to my Favorite Charts in StockCharts.com so that I can follow it. I noticed that at the close on Friday, FSIIX went up +.03% from the previous day, while the I-Fund went up +.05%, but as you say, it seems to mirror the I-Fund more closely than the EFA ETF.
 
This new weapon will go with the rest in my financial gun case. I'll take it to the range this coming week to see if it'll tear out a 300 meter silhouette.
http://finance.yahoo.com/q?s=fsiix
Thank-you.
sponsor said:
Vethost,
As a follow-up, I saved FSIIX to my Favorite Charts in StockCharts.com so that I can follow it. I noticed that at the close on Friday, FSIIX went up +.03% from the previous day, while the I-Fund went up +.05%, but as you say, it seems to mirror the I-Fund more closely than the EFA ETF.
Click to expand...
 
Fivetears said:
This new weapon will go with the rest in my financial gun case. I'll take it to the range this coming week to see if it'll tear out a 300 meter silhouette.
http://finance.yahoo.com/q?s=fsiix
Thank-you.
Click to expand...

This is another good page to save! If you, or anyone else, finds other funds that also mirror the I-Fund just say the word! Perhaps other discount brokerages such as Schwab or Scottrade to name a couple, have similar funds?
 
The Nikkei 300 started the morning off in the red, then it skyrocketed after lunch for a gain of 1.45%.

Barclays still owes the I-fund 10 cents.
 
Yen gains as markets brace for BoJ rate rise
LONDON, July 10 (Reuters) - The yen strode to a one-month high against the dollar on Monday as robust machinery orders data bolstered expectations the Bank of Japan would raise interest rates for the first time in six years later this week.
"We do not view a gradual removal of the BoJ's monetary stimulus as a threat to either the Japanese economy or to Asian and global financial markets," said Schmieding. "We are inclined to applaud the BoJ and look for healthy growth in Japan and beyond."
http://asia.news.yahoo.com/060710/3/2myk4.html
 
You must log in or register to reply here.

Similar threads

M
What is the New I Fund Ticker Symbol?
Replies
1
Views
175
TommyIV
TommyIV
tsptalk
The I-Fund 2024
Replies
6
Views
2K
tsptalk
tsptalk
tsptalk
  • Article Article
TSP Talk - The stock market dismisses weak tech earnings and rallies on lower yields
Replies
0
Views
145
tsptalk
tsptalk
tsptalk
  • Article Article
TSP Talk - Stocks bounce back, but Google's earnings may get in the way
Replies
0
Views
140
tsptalk
tsptalk
tsptalk
  • Article Article
TSP Talk - A rally, tariffs, and Apple earnings
Replies
0
Views
226
tsptalk
tsptalk
Back
Top