September has been a good month for those who have timed it right, but there are those you tried and failed. What were their main differences and what can you take from it to better your investment strategy?
Among the TSP Talk AutoTracker, 174 members made at least one IFT so far this month. How have they performed?
The top performers
Sixty of the 174 members making moves in September have outperformed all of the TSP funds for the month (>1.69%). With one trading day left in September, roughly a third of those who have tried to optimize their return have succeeded. The average scenario for these winning investors was they were cash (G-fund) heavy to start the month and were willing to jump into stocks after a few days of selling.
What distinguish those at the top is they have remained in stocks since. After seeing this pattern of strong gains, followed by a sell-off, followed by strong gains, many members were quick to move to cash when the gains came in mid-September, me included.
The current average allocation of these top 60 is: G: 57.5%, F: 2.1%, C: 17.9%, S: 20.2%, I:3.5%
That is a lot of cash holdings for members who profited from the mid to late-September rally in the stock market. But having cash at hand during a market sell-off was the key to their recent success, so it makes sense to them to lock in gains and wait for the next buying opportunity.
The cost has been missing out on the gains that followed their moves to the G-fund. The current top 4 members of September, wvango, papahotel66, widdicom, and Nitsua, all hold 0% G-fund and 100% stock funds, S-fund heavy. Without them, the average G-fund allocation of the remaining 54 jumps to 63.9%. Even as the market action has slowed down, all of the TSP stock funds took in gains this week and these members were able to soak them up. These four now have an average September return of 6.0%.
The current leader Wvango is a TSP Talk Premium Member so we will keep their exact allocation private here. Fellow TSP Talk Premium members with TSP Talk AutoTracker accounts get access to the TSP Talk AutoTracker Standings that include Premium Members.
Here are the weekly, monthly, and annual TSP fund returns for the week ending September 27:
Middle of the Pack
Only 19 of the 174 AutoTracker members who have made IFTs in September have returns on par with the returns of TSP funds. Their returns range from 1.38% (The I-fund return) and 1.69% (The C-fund return).
The current average allocation of these 19 is: G: 45.7%, F: 1.1%, C: 27.6%, S: 18.4%, I: 1.5%
They hold more stock funds than the top 60 and are also more C-fund than S-fund heavy.
Sixty-two of 174 AutoTracker members are under performing the TSP stocks funds and are at least even with the G-fund for the month (Returns from 0.30% to 1.37%). They too are G-fund heavy; their current average G-fund allocation is 55.3%. Many of these members locked in gains too early in the month or jumped into the September rally too late.
Bottom Returns
Thirty-three of the 174 AutoTracker members who made IFTs this month have underperformed the G-fund (<0.30%). Twenty-five of them hold a negative return for September.
The average allocation of these 33 is: G: 56%, F: 7.7%, C: 20.0%, S: 13.6%, I: 2.1%
Their average allocation is not too different from the top members. They do have more F-fund invested and their C-fund holdings are larger than their S-fund holdings.
But timing is what troubled these investors the most. Many of them were invested in stocks when the market began to sell-off in early September and were provoked to the G-fund before the market turned around. Some stayed invested until their monthly return moved back to near even before jumping out.
Here is the S-fund chart for the month of September. Both the best and the worst IFTs made this month were within the blue square time. The difference was whether those transfers were from the G-fund to the S-fund (best), or the S-fund the G-fund (worst).
It is hard enough to move out of the way of market sell-off with only two IFTs a month and a noon ET decision time. But what our peers have taught us is panic selling feels helpful at the time but can lead to a worse off scenario. And although the top four September performers are fully invested, the opening days of September show us that is not a bad idea to put some cash aside after a run higher. You are able to protect your capitol, and you have opportunity to put cash to work when the market gets cheaper.
Volatility came to a halt this week so those who moved to cash in the prior week are not too shaken up about it. Most have cash to throw at a pull-back and a fresh set of IFTs coming on Tuesday if they want to increase their stock exposure.
We've just looked at the members of the TSP Talk AutoTracker who made IFTs this month, but there are many more who rode the market without action.
The average allocation of all non-premium members (708) is: G: 34.6%, F: 3.7%, C: 29.8%, S: 24.9%, I: 3.5%
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Thomas Crowley
(TommyIV)
www.tsptalk.com
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The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
