TSP strategy for mid 40's with 20 years till retirement. Anyone? Bueller?

[clester]

I guess there is no real conversation in this forum, people seem to only come here to talk about daily strategies which is a dumb way to invest in TSP. $2.1 billion in outflows in the C, S, and I funds in June. All those people are suckers IMO.

Unfortunately there is no daily strategy in TSP. The TSP board thinks we are too dumb to manage our funds daily. Its now much more complicated as we can only move into stocks 2 times a month now!

 

[evilanne]

Unfortunately there is no daily strategy in TSP. The TSP board thinks we are too dumb to manage our funds daily. Its now much more complicated as we can only move into stocks 2 times a month now!

I don't like the 2 IFT limitation. The limitation was initiated because a small group of people were making excessive number of trades, resulting in excessive trading costs for the TSP, especially the I Fund. see https://www.tsp.gov/PDF/bulletins/08-4.pdf

 

[burrocrat]

I don't like the 2 IFT limitation. The limitation was initiated because a small group of people were making excessive number of trades, resulting in excessive trading costs for the TSP, especially the I Fund. see https://www.tsp.gov/PDF/bulletins/08-4.pdf

i don't buy this explanation, because none of the tsp funds are actually traded on any stock exchange, they are not registered securities anywhere and when you or i make an ift it does not cause an individual trade for 'x' number of shares for 'y' dollars to be debited or credited to our accounts and there is no individual transaction to generate a fee.

instead, we all own proportional "shares" of one of five giant gov "funds" that are designed to track the indexes, and tsp.gov rebalances each of these accounts every trading day no matter what. for two reasons, think of it this way:

reason #1) for simplicity sake, let's say there are only five tsp participants and each is 100% in only one fund. maria is 100-g, deshawn is 100-f, neal is 100-c, naoki is 100-s, and bob is 100-i. let's say on monday morning before work neal and bob both watch squawk box on cnbc and think the world is going to end today and they want to minimize risk (nevermind that if the world ended today, it would not make one bit of difference which fund your money was in). so neal and bob each make an ift trade to protect their digital future money. none of the other 3 participants fall for the hogwash on the boob tube and they stand pat. neal is a nervous nellie and moves 50% to g-fund. bob is more practical and shares the risk among all funds at 20% each. what happens? well since there are not any registered securities name g- f- c- s- or i-funds to actually trade, nobody incurs any costs until the market close, by which time tsp.gov must rebalance every single fund to match the overall makeup of its portfolio to match the sum of individual participant holdings. g-fund must go to 170 to account for the 50 neal and 20 bob moved in, f-fund goes to 120 because of bob's 20, c-fund goes to 70 because neal bailed 50 but bob entered 20, s-fund goes to 120 because of bob again, and i-fund goes to 80. at the beginning of the day the entire tsp portfolio was 100-g, 100-f, 100-c, 100-s, and 100-i. at market close the entire tsp portfolio is now 170-g, 120-f, 70-c, 120-s, and 80-i. thanks a lot neal and bob. but it is not really neal and bob's fault, see reason #2 below.

reason #2) the lifecycle funds. each of five lifecycle funds hold a specific percentage of the underlying g- f- c- s- and i-funds. let's say tsp now has 10 participants and 5 of them are not the active investing type so they each pick a different lifecycle fund with a risk profile tailored to their age and expected retirement timeline. since markets do not have perfect symmetry, any and likely all of the 5 funds are going to finish the day at a different price than they started the day with. this changes the relative weight of each fund in a stagnant portfolio because as s-fund increases in value it now represents a different larger percentage of your account. the nature of the lifecycle funds is that they must maintain an exact percentage weighting of the dollar amount of any fund in them. so even if nobody trades in a given day, the lifecycle funds but must do a massive overall rebalance of each of the underlying g- f- c- s- and i-funds anyways. thanks lifecycle funds.

so who is to blame for all this? it is not rocket science. the brokerage house that tsp.gov contracts with to mirror the actual market with real securities trades securities because that is what brokerage houses do. and because of the 12:00 noon ift deadline they have a four hour lead on the market, they know the target at noon and have until the closing bell to hit it. easy peasy. tsp.gov of course needs a number of gs-15 and gs-13 executives to watch the brokerage house trade for them on behalf of the tsp participants. and as luck would have it, they all often go out to the same steakhouses and sip bourbon together and congratulate each other for "making" money.

so it is not neal and bob, nor the lifecycle funds, who are at fault. it is just the nature of this free digital maybe worth something in the future money game. but don't be fooled, the number of individual trades in any given day or month is not responsible for the 2 ift per month limit. that is a different story altogether.

 

[ravensfan]

Nice explanation burro!

 

[clester]

I don't like the 2 IFT limitation. The limitation was initiated because a small group of people were making excessive number of trades, resulting in excessive trading costs for the TSP, especially the I Fund. see https://www.tsp.gov/PDF/bulletins/08-4.pdf

It didn't increase costs at all. They just didn't want us trading. I think cost to tsp actually went up.

 

[evilanne]

It doesn't matter if you buy it or not, it is what happened.

Preamble. Under the Federal Employees’Retirement System Act of 1986, theThrift Savings Plan (TSP) was created tooffer passive long-term investmentsdesigned to improve the retirementsecurity of Federal employees. As aresult of analysis performed in 2007, itbecame clear that a small number ofTSP participants were pursuing ‘‘markettiming’’ active investment strategies inthe TSP. These activities were dilutingthe earnings of the long-term investors,and adversely affecting the ability ofTSP managers to replicate theperformance of selected indexes asrequired by law.

'
If you read the FRTIB's Final Rule in the Federal Register, they addressed all the public comments received in response to the proposed rule in detail see pp 9-17 https://www.tsp.gov/PDF/bulletins/08-4.pdf

 

[burrocrat]

well if that preamble is correct, that tsp is a passive investment model and frequent trading increases costs for everyone, and we all have been limited to 2 passive ift's per month instead of unlimited trades for many years now, wouldn't one expect management fees to go down? the proof is in the pudding.

 

[DrDetroit]

The only suckers here are the ones that come to a site that clearly states "friends don't let friends buy and hold" preaching to every one that should indeed buy and hold. All of a sudden now you say that you are 100% G. Does that make you a sucker like the one's that pulled their money out of C, S and I funds in June? I really don't understand..........................It's probably because I don't have a degree in finance, although what that has to do with investing or trading, I'm not quite sure.

You don't understand sarcasm do you? If you want to get smarmy, I'll play along.

No reason to get all butthurt because I know the "Intrepid Timer" or any other system you think works doesn't, you don't need a degree in finance to know markets operate independent of irrationally flawed methodology. Plenty of Wall Street types lose their houses and boats every single day thinking they have come up with the perfect system, and the beat goes on.

 

[Warrenlm]

Ref the discussion and linked pdf on the two IFT limit....there's other threads and links around here I'm sure and my memory, both short and long at this point, is failing, but I remember the event being caused by EbbnFlow and his followers, and the broker's losses on the I Fund changes. I remember complicated calculations and discussions about the exact share price and how adjustments kept being made from what it ostensibly should be. I took it that bankers are in charge. Ok, I'll go back to sleep now.

 

[Intrepid_Timer]

You don't understand sarcasm do you? If you want to get smarmy, I'll play along.

No reason to get all butthurt because I know the "Intrepid Timer" or any other system you think works doesn't, you don't need a degree in finance to know markets operate independent of irrationally flawed methodology. Plenty of Wall Street types lose their houses and boats every single day thinking they have come up with the perfect system, and the beat goes on.

I get "butthurt" when I see deceit and straight out lies on a forum that I've been a member of since 2004. We don't need it or want it. Also, there have been lots of naysayers along the way, but I'm still here and still making money.....................

 

[DrDetroit]

I get "butthurt" when I see deceit and straight out lies on a forum that I've been a member of since 2004. We don't need it or want it. Also, there have been lots of naysayers along the way, but I'm still here and still making money.....................

Here is what I suggest. Just get rid of this forum and any others that even mention long-term investing in the TSP. Put key words in that alert you if any scoundrel that wants to buy and hold, send a pop up banner with your market-timing system that crashes the computer if they try to move off of it. The only sub forums should be Silver: the next Microsoft, Whole Life Insurance Annuity Strategies, and How to cheat your elderly family members with Reverse Mortgages.

 

[RazorCat]

I don't like the 2 IFT limitation. The limitation was initiated because a small group of people were making excessive number of trades, resulting in excessive trading costs for the TSP, especially the I Fund. see https://www.tsp.gov/PDF/bulletins/08-4.pdf

I have to come clean. I was one of those traders years back that got a letter in 2008 from TSP about excessive trading. I framed it to remind of how much money I made during the no-limit IFT days of TSP. There was a small group of investors (a few thousand of the 3.9 million at the time) that were moving in and out of stock funds every day or two, and doing quite well. Moving between I, S, F, and G several times a month. The costs of processing those trades had little or nothing to do with why the TSP Director set IFT limits. The letter stated:
Last year, it became clear that a few thousand of the 3.9 million TSP participants were making frequent IFT requests. Because this activity was clearly accelerating, and in light of its detrimental effect on fund performance and transaction costs, the Agency is implementing limits on IFTs effective May 1, 2008.
I'm no financial expert, but I never understood how the frequent trading of a few thousand traders impacted fund performance for the masses. "Nut up and go for it". Or don't. Your choice. And if it was adversely impacting transaction costs, then raise them. The amount of money I was making with unlimited IFTs far outweighed any increase in TSP administrative costs. Never did like Greg Long.
What little extra work we generated for the outdated TSP computers was starting to annoy them. They didn't want any "Day Traders" to create extra work. Imagine the possibilities if we had even 2-3 more trades a month.
It is what it is.

 

[tsptalk]

Here is what I suggest. Just get rid of this forum and any others that even mention long-term investing in the TSP. Put key words in that alert you if any scoundrel that wants to buy and hold, send a pop up banner with your market-timing system that crashes the computer if they try to move off of it. The only sub forums should be Silver: the next Microsoft, Whole Life Insurance Annuity Strategies, and How to cheat your elderly family members with Reverse Mortgages.

So, treat it, and them, like you are treating market timers? Got it.

 

[Intrepid_Timer]

Here is what I suggest. Just get rid of this forum and any others that even mention long-term investing in the TSP. Put key words in that alert you if any scoundrel that wants to buy and hold, send a pop up banner with your market-timing system that crashes the computer if they try to move off of it. The only sub forums should be Silver: the next Microsoft, Whole Life Insurance Annuity Strategies, and How to cheat your elderly family members with Reverse Mortgages.

You irked me when you called market timers suckers, not when you mentioned long-term investing. I guess that was okay though, but me calling you on it wasn't. Typical....................

 

[DrDetroit]

You irked me when you called market timers suckers, not when you mentioned long-term investing. I guess that was okay though, but me calling you on it wasn't. Typical....................

It's all good. I read a lot and this forum does have some decent information relative to the TSP, so I can learn a few things that make me a more astute investor. Not sure what is typical, I've posted in Bogleheads forums for years, it's usually a group effort to getting people where they need to go. As far as anyone thinking any particular strategy is better than the other, it's irrelevant. As long as people are contributing enough to get the TSP/private company match, they can put their 401k plan in Navy beans for all I care. It's your money, not mine.