Short versus Long

[GALLO1]

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Can anyone tell me exactly how Dollar Cost Averaging can be an advantage? My dilemma is whether to play the short term investing that the majority of the members on this board do or go1 year at a time and readjust annually.



I’ve made 12 IFTs since 18 Apr 05. The TSP seems to be too difficult to time. When I see an opportunity or think that I see an opportunity I make my move, but I’m usually a day late. I miss the increases and then when I want to bale outto safety I’m still a day late.



I can’t say that I’ve chosen a strategy to go with yet, but even I did, I would still have at least 24 hours to gamble with.



I’m contemplating on going longer term. However, I know that means riding the waves up and down. If I ride the wave down, wouldn’t it pay back with more shares bought? And then when the wave goes up wouldn't I make up for $ loss.



Can someone help me with the pros and cons on the short term versus long term investing?

 

[Birchtree]

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Gallo1,

In my opinion, the first thing you have to do is recognize that the funds in TSP are not very volatile. This is an intentional strategy by regulators that are acting in a fiduciary manner - on your behalf.

Your objective while you are young should be to accumulate shares, not worry about trying to make money. Therefore, the easiest approach would be to dollar cost average into your fund choices. Just leave everything up to the odds that life will present - who knows what the future will bring 10 or 15 years down the road. I do know TSP will still be evident and active. Once you have a good accumulation of multi-thousand share positions then you will be ready to lock and load. That's why all the folks get excited over a copper - because they have years of growth in their accounts and they may receive $200 to $300 a hit. That is still not any money to speak of when you may have the ability to make thousands.

While you are in the process of accumulatio on auto-pilot start studying the markets so you will have knowledge and enough experience to be comfortable in pushing around $400,000 to finally be able to make serious money. The older you get the more money you can put into TSP especially with catch up provisions. Don't shrink from this advantage that cash will provide you. I realize this is not your average mundane conservative approach - but it is your money and your opportunity, just be prepared when the time arrives.

Another strategy you could use to gain trading experience would be to open a Roth IRA. Use a discount broker on line to reduce fees and make your own decisions and learn from your own mistakes- you won't sacrifice that much while in the learning process. Hope this gives you a different perspective.

 

[GALLO1]

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Hey Birch,



Thanks for your input. I knew you’d come through. When I’ve read your post in the past and you talk about being the only one left outside of the bear cave/G-fund, I want to jump back with a reply saying, hey, I’m out there with ya, but then I don’t because I don’t know if I’m a bear, a bull, a contrarian, or something altogether different.



Anyway, I will take advantage of the catch up funds in just a couple of years. Huh! I don’t feel young, but I figure I still have 10-15 years to go and I need to make up for lost time.



Again, thanks BT

 

[puertorico]

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supose u put 100 dollar in s/p 500 always
ifthe market go down with 100 dollar
u will be buying more share less price .
BUT the same when the market go up
100 dollar s/p 500 u will be buying less share
HIGHLY PRICES .

Can someone help me with the pros and cons on the short term versus long term investing?

1- U do not worry about the market to much
wich dollar cost average u can sleeps better ..

I dont see advantage but feel confortable becouse
u buyin more share went the markets is down
and that make u will feel good even in bad time .


Interesting Question ! Any other input ?..

 

[Spaf]

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Sorry, but I don't see a valid long term strategy for the market or investors.
First, lets take a look at reality. Go to http://bigcharts.marketwatch.com

Take a look at the market. Start with the DJIA. Look at the All Data from 1970 to 2005. In 2000 the market changed drastically. Buy and hold which had worked great for year after year, went flatline and died!
Go to 1 decade and see how the market has performed, then go to 2 years and see what has happened since the start of 2004.

Sooner or later a decision will be needed. Go long term with the odds against you. Or try and catch some good times, and pull out of the bad ones.

There are basically three trading positions: Position, Swing, and Day. Swing traders hold their positions for a few days or more. Position is more akin to opportunity, and we all know what day traders do!

What is the difference between investing in TSP and having tax paid accounts with an online broker? What about having both! I can cash in money from the broker account. Can't do it with TSP. ETFs comprise hundreds of different fund types, some are declining, some are advancing.

The investment world has a lot of options. Some risky, some not! Everything from money market accounts to tech stock.

After the stock market crash of 2000, when many lost large sums of money because professional advisors or mutual fund managers didn't protect their portfolio principal, investors chose one of two options--getting out of the market altogether and seeking safety or finding out more about how to manage their own portfolios.

IMHO nowdays you have to manage your own accounts. I have a little of everything. And, I can move funds to take different positions, that are favorable to me. If something goes wrong, I can take quick corrections to avoid a crash.

My 2 cents

Rgds Spaf

 

[Birchtree]

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Spaf,

According to definition I must be a position trader. If I were just starting out in TSP I would dollar cost average and hope the odds stayed against me for years until I could get a significant accumulation of shares so I could make trading financially rewarding. Then I would turn up the heat and make as much as possible.

I'm waiting for the DJIA to confirm the DTA and the DUA which will be putting i n new all-time highs shortly. This would be a primary confirmation according to Dow Theory Principles. You obviously don't see the DJIA reaching a new high past 11,723 that was made on 1/14/00.

The primary non-confirmation by the DJIA of the DTA was when the latter made an all-time high of 3872.17 on 3/8/05, while the DJIA failed to confirm this all-time high. I think this situation will rectified in the not to distant future - probably before the summer is over while most market professionals are at Fire Island - it would be a classic take off - leaving most players looking up.

 

[Spaf]

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Birch

If you were just starting out in TSP what sort of allocation would you use (25-25-25-25-25) ??

I would love to see the market take off. My concern is with the horsemen Krude and Rats (crude and rates). They have been a plague on the fundamentals / economy. And then the other day there was a supprise rise in inventory levels. How do you get an unexpected increase?

Have a good one Dennis! Rgds Spaf

 

[Birchtree]

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Spaf,

If I were just starting out I would go 75% C fund and 25% I fund - and just build and accumulate as much and for as long as possible. Then once I have 10000 to 15000 of each I pull out the pistols and be ready to shoot out the targets. To be a trader dealing with small changes you need considerable capital to utilize the leverage of 100% any fund. It does disturb me when I see folks spend their working careers accumulating significant sums and then decide just because they are close to retirement to be ultra conservative. Not for me - make my money work. As a position trader I won't sit in the C fund forever - only until I get a price of $15.00.

Can you imagine how rapidly accounts will build once salty dogs can start putting in $20,000 plus 5% matching in 2006. If they prepare they can conceivablydouble their funds available for retirement . If they stay in TSP they can make even more over another number of years.

 

[GALLO1]

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BT,

I just made an IFT and allocations change today for 70-C, 15-S and 15-I. I noticed where you've said that as a beginner you'd load up on two funds: C&I. You had also commented that you have reservations about theS-fund. Can you share some of your reservations about the S-fund? What do you like about the I fund?

Steve

 

[Birchtree]

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Gallo1,

Please see my comments in BT account talk for 7/4/05. Also review day to day market talk by spaf on 7/4/05 to DaveM. This should help clarify some of my not so positive thoughts for the S fund. Remember this change will take some time to eventually develope. In the meantime I'll sit in the C fund and collect more shares while making a few thousand. I noticed you now have a good position - will you stay to collect shares? If you read the initial posts by Macdtrader you will see his technique for accumulation during the 1990s. We did pretty much the same thing - only I missed the technology boom and bust - but kept my allocations going into the C fund until the S fund came along. That was in March 01, began moving into that fund around the first bottom of 7/02 and eventually loaded up on the third bottom. Any time you can see a triple bottom at the end of a serious bear market you can bet some serious upside move is on the way - and 03 was just what was ordered to heal the pains the bulls were experiencing. In 04 the Dow put in 4 different trading bottoms only the last bottom in 9/04 was a head fake. No other index confirmed that bottom and we rallied for 3 months. I was totally out of the S fund at the first peak in 2/04. Switched to the C fund 5/4/05 and will collect more shares and stay put until I get a $15.00 price or better. All through 2004 I kept my allocation going into the C fund inorder to dollar cost average. Investing this way takes time and more time, you just can't hurry until you get large enough to make a difference.

 

[GALLO1]

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BT,

Yes, I believe I'll hang in the C to buy shares. I'm trying to decide if I should combine my 15% S & 15% I to one or the other for a 30% total in one fund. I looked for your account talk on 7/4/05, but I guess I didn't know where to look. I assume the date is 7 Apr 05. Where am I not looking?

When you say time and more time and that you can't get in a hurry. I'm thinking maybe at least 10-15 years. I may be a pessimist, but I figure we are probably headed for some very tough times with the following issues:


· Housing bubble, it may not burst but it'llcertainly have a serious impact on the economy.

· Crude I don't think we'll ever see itdrop to where it once was, It'll be history. Alternative fuel sources I think is the only real solution to this problem.

· Trillion-dollar deficit is beyond my comprehension. It's Iraq now, but I see North Korea, Iran and China as our next challenges. I think we might be in some of those places now if we had the resources, especially manpower.

· Terrorist attacks on US soil, I don't think it's a question of if, but, rather when?

· Aging/retiring work force will certainly make a large deficit more difficult to pay down, which I think will increase taxes on everyone.


These are just a few of the big issues I see on the horizon. With that said, I still feel that one has to play the cards that life deals us. I think I need to load up on equities because if things do get economically tough pennies won't matter anyway.

Your thoughts or anyone else’s thoughts are welcomed?

 

[tsptalk]

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GALLO -
My thought are that if you look you will always find a reason why the market will fall, or go up.

You mention dollar cost averaging and that is a great was to invest. If you plan to be a long term buy and hold investor I wouldn't torture yourself with the day to day market gyrations. If you do plan to play around a little then I do believe a couple of things you mention could give the market reason to pause.

I don't see a crash in the near future, but there will obviously be bumps in the road. These pullbacks will be small blips on the long term charts. You just have to determine whichinvestment style suits you best and stay the course.

Good luck!
Tom

 

[Birchtree]

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Gallo1,

Reference BT account talk dated July 4th, 2005 - not April. Also read macdtrader account talk at the beginning. It takes awhile to determine your own style - but either way - invest or trade - you need larger sums to profit to any degree.

 

[Bullitt]

Thinking about following analyst Upgrade/Downgrades for advice? Read this first.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aaQDUAN2hm5Q

The best times to buy just may be when they are giving the sell signal. Brokers often issue sell signals when a stock has already been hammered. I see brokers today issued a signal to short banks. They might have been short banks for the past six months, that doesn't mean it's time to take their advice today.