Some newby Questions, c vs. s, and I vs $

[adestonobis]

Hi all,

As a newby to this forum, and newly active in TSP actions, a couple of things appear less than clear to me:

1. The S fund moves up more and down less than the C fund, at least lately. Why would anyone who wants into equities not put it all in the S fund?

and

2. The I fund just jumped up massively 12/1 & 2, despite the stronger Dollar. I thought they generally moved in opposite directions.

and

3. Nobody seems to have systems for buying and selling the I or F funds. Now, it appears to me that many or even most systems for the regular equities are trying to make sense out of chaos, and some seem to work. Are the F and I so chaotic that there are no semi-reliable predictors?

 

[Boghie]

adestonobis,

The 'S Fund' has a higher risk (standard deviation) than any of the other funds. Here are the Annual Returns/Risk of each fund:

F: 4% / 5%
C: 10%/16%
S: 11%/20%
I: 10%/17%

1. That means that in any one normal year (ie. not 2008:nuts you can expect the 'C Fund' to earn anything from -6% through +26% while the 'S Fund' can be expected to return anything from -9% through +31%. Basically, the 'S Fund' bounces around a lot more than the 'C Fund' and you have to be able to stomache 10% losses as a norm. However, over the long haul you will make a better return than that on any of the other funds. But, if you bail out because you cannot handle losses than it will eat you alive and leave you with an 'Alpo Meal Deal Retirement Plan'.

2. Patterns work till they don't. I have fun with the short term radio shows. The same events result in different outcomes and the goobers find a reason. Entertainment

3. Folks are not basing strategies on the 'F Fund' because it seems toppy. Kinda bubbly. It is ready for an outsized correction. It has already had very large returns (for it) over the past two years or so. Many folks like the 'I Fund' for the very reason you mention. There were nine chaps (The Nine Nazgul of the I Fund of Sauron) who spend most of last year in the 'I Fund'. They made major bank. This year, not so much. Some like it long term because of the normalizing taking place between the world economies. The 'I Fund' should be less chaotic than the 'S Fund' - and as Europe and Japan become more powerful they will probably become the S&P 500 of foreign markets. Actually, they are that right now...

 

[tsptalk]

Welcome adestonobis!

2. The I fund just jumped up massively 12/1 & 2, despite the stronger Dollar. I thought they generally moved in opposite directions.

The dollar was actually down on 12/1 and 12/2, hence the big moves in the I-fund.

3. Nobody seems to have systems for buying and selling the I or F funds. Now, it appears to me that many or even most systems for the regular equities are trying to make sense out of chaos, and some seem to work. Are the F and I so chaotic that there are no semi-reliable predictors?

The Ebbchart system uses the F and I funds often, but many times G has to be used instead of F because the monthly IFT limit may have been hit and it's the only option on a sell signal. Trader Fred will also use the I fund if he gets a signal.

 

[adestonobis]

Hi, thanks for the replies, and especially corrections. If nothing else, trying to digest this market analysis makes you feel small... There's a whole 'nuther language and culture to learn here. I recently watched, and will rewatch, a NOVA episode on the psychology of investing, to try to recognize and catch myself before making emotional moves.

But to tweek on recent performance, is the historical c/s risk/return still holding? Or could I say more accurately, that its since we are in a rising market that the S is rising more, and dropping less? But I thought I would expect larger swings up AND down in the S... It doesn't seem to be happening right now.

And don't get me started on news commentators... But, are we all (mostly) deluding ourselves with all of our charts, data, sentiment, etc. I'm not throwing stones, just musing... Its definitely interesting, and educational. I just hope to make it lucrative!

 

[tsptalk]

I recently watched, and will rewatch, a NOVA episode on the psychology of investing, to try to recognize and catch myself before making emotional moves.

I'll have to look for that show. I find psychology / sentiment, THE most important aspects of trading.

But to tweek on recent performance, is the historical c/s risk/return still holding? Or could I say more accurately, that its since we are in a rising market that the S is rising more, and dropping less? But I thought I would expect larger swings up AND down in the S... It doesn't seem to be happening right now.

Small caps do well in low interest rate environments, and with rates being very low for some time now, it makes sense that they continue to outperform. One day that will change, like if inflation becomes a problem and rates have to be raised, but until then...

 

[adestonobis]

Here is the link to Nova: Mind Over Money

http://video.pbs.org/video/1479100777/

I'll have to look for that show. I find psychology / sentiment, THE most important aspects of trading.


Small caps do well in low interest rate environments, and with rates being very low for some time now, it makes sense that they continue to outperform. One day that will change, like if inflation becomes a problem and rates have to be raised, but until then...

 

[tsptalk]

Thanks! I am going to copy your post with that link into the Psychology of Trading forum.

 

[Boghie]

But to tweek on recent performance, is the historical c/s risk/return still holding? Or could I say more accurately, that its since we are in a rising market that the S is rising more, and dropping less? But I thought I would expect larger swings up AND down in the S... It doesn't seem to be happening right now.

And don't get me started on news commentators... But, are we all (mostly) deluding ourselves with all of our charts, data, sentiment, etc. I'm not throwing stones, just musing... Its definitely interesting, and educational. I just hope to make it lucrative!

The Quicken Return/Risk numbers change with each version. I have just checked the Quicken S&P500 ('C Fund' - US Large Cap Stocks) against MoneyChimps CAGR and they came up fundimentally equal. So, my numbers are adjusted annually. And, with the long life of the various market sectors we have available a single year doesn't affect the averges much.

Obviously, Tom is right. He knows his stuff. Much better than I. I don't know much - but I find the learning fun. Anyway, the S Fund should do well pulling out of a market recovering from a recession while interest rates are low. And, just wait a bit - you will see the larger down swing.

Charting is important - and I don't understand them. There can be some market moving influence as everybody watches the same squiggly lines but the market is really too big and too diverse to be gamed for long. There are too many strategies out there. And, chartists will change what they are looking at based on fundimentals. And, fundimentalists will change their opinions based on momentum. Kinda funny:nuts:

 

[nguyensv]

Welcome adestonobis!

The dollar was actually down on 12/1 and 12/2, hence the big moves in the I-fund.

The Ebbchart system uses the F and I funds often, but many times G has to be used instead of F because the monthly IFT limit may have been hit and it's the only option on a sell signal. Trader Fred will also use the I fund if he gets a signal.

Can someone help explain the chart to me?
What does the Y axis represent?
I've seen different values on different charts through google finance and fiance.yahoo.

 

[tsptalk]

Can someone help explain the chart to me?
What does the Y axis represent?
I've seen different values on different charts through google finance and fiance.yahoo.

The value of the dollar index.

http://www.marketwatch.com/investing/index/DXY

It's kind of a continuous dollar future - no expiration.

 

[Bullitt]

Nice link. At the end of the day, every technical indicator is a measure of crowd sentiment.

 

[JTH]

3. Nobody seems to have systems for buying and selling the I or F funds. Now, it appears to me that many or even most systems for the regular equities are trying to make sense out of chaos, and some seem to work. Are the F and I so chaotic that there are no semi-reliable predictors?

Trading the I-Fund can be more difficult when you factor in the limited number of IFTs. When you buy the I-Fund you have so many other things to worry about that can go wrong. What happens when EFA does great, but the dollar hits a bull leg? Buying the I-Fund is like buying 10+ indexes & currencies, but the problem is you still only have two full IFTs to work with.

When I'm watching the I-Fund I watch a minimum of 5 charts, sometimes more and it gets nerve racking. It's also more difficult to measure your success when you could be up on the Euro, but down on the Yen and at the end of the day you don't know how it's going to work out till TSP.Gov post the results. Throw in the fair valuation from large fluctuations and it's just one big azz-pain to deal with.

 

[JTH]

Oh I forgot to mention, the NOVA special is also on Netflix play it now. It's an enjoyable watch and has helped me with my own trading.

 

[KevinD]

Oh I forgot to mention, the NOVA special is also on Netflix play it now. It's an enjoyable watch and has helped me with my own trading.

This NOVA? http://www.pbs.org/wgbh/nova/body/mind-over-money.html

EDIT: Woops...just saw the link above. (or it could be below for some of you... )