tsp When to buy in?

[Randy]

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Hello. Im new to the tsp family so I hope my questions aren't to painful.

All my money is in the G fund from the beginning. Is there an ideal time to diversify my tsp or should I go with the L fund until I understand this better.

 

[teknobucks]

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Randy wrote:

Hello. Im new to the tsp family so I hope my questions aren't to painful.

All my money is in the G fund from the beginning. Is there an ideal time to diversify my tsp or should I go with the L fund until I understand this better.

i would go 70 c... 30 i ....and forget it...if u r young and not following day to day movements:^

some might recc. 20% in every fund for more safety....it's all up 2 you!

**no way doi want feds peddling any lifecycles 4 meworry with theL funds the tsp mm's will dip inmy account 4 fees a bit more than they do with the five existing funds. just not comfortable with some new financial product from the tsp folks at this point

jmho

tekno

 

[Birchtree]

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Randy,

You just received some very sound advise - but don't forget to adjust your allocation dollars for dollar cost averaging. It's like trading only on auto - pilot until you can accumulate a substantial power account - it won't take long. Then you will be ready to make the serious money. It always takes money to make money - and you have to work many years to enter the gladiator arena. If you have arrived and are ready the time to play is now - catch the next 3000 point run. Good luck.

Dennis

 

[tsptalk]

imported post

Randy wrote:

Hello. Im new to the tsp family so I hope my questions aren't to painful.

All my money is in the G fund from the beginning. Is there an ideal time to diversify my tsp or should I go with the L fund until I understand this better.

Welcome Randy -
There are many things to consider including your age, when you need the money, if you have other investments, etc.

I think the L-funds are a great tool for most people. Most of us here won't be using them, but we aren't like most people. We enjoy following the market and the challange of trying to beat it.

So I'd say use the L funds unless you want to learn more about stocks, bonds and yourself. The latter is the real fun part.

Thanks for joining us!
Tom

 

[Randy]

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Thanks for the advice. Another question, what did you mean by adjusting allocation dollar for dol. cost averaging?Thanks

 

[Birchtree]

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Randy,

The L fund not your style? If you decide to IFT into the C fund and I fund, you will want your payroll contributions to go into those funds - not the G fund. Well you could have a percentage of contribution going to the G fund - it would have been useful as a strategy to leverage down with the reserves on a day like yesterday or today to get lower prices. But usually your contribution allocation can match your percentage of each fund - or you could just put in 50% each. But the C fund is cheaper than the I fund, and using 70% contribution buys you more C fund shares every two weeks. But I would recommend if at some point in the future you decide to move funds back to the G fund - keep your contribution allocations where they were and continue to dollar cost average even when the majority of your funds might be seeking shelter for a while. That way you buy all the way down until a bottom is formed which can take several years. It's some what like watching money go down a rabbit hole - eventual the cycle will start again and you will be way ahead.

Dennis

 

[Randy]

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I'll make it short and sweet. I'm 36 years old and ready to gamble. I have 30 years till I retire.What would you recommend to do today Aug. 18. Roll the dice.

 

[Birchtree]

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AnRandy,

I'll try and answer some of your questions regarding the strategy of dollar cost averaging and leveraging down.

If you read the lates DaveM account talk you will get an idea of how this is applied on a real time basis. Dave used to be a trader, but has relegated himself to the more quiet pursuit of accumulation of shares.

Let's set up a scenario that happened recently. Let's assume that on the last market peak on 3/7 you decided to come out of the G fund. You purchased a 50% position in the C fund using $50,000. You still have $50,000 remaining in the G fund. You also decide now that you want your contributions to go directly into the C fund from this point forward. Let's assume you are allocating $1000 every two weeks into the C fund regardless of anticipated pricing.

It did not matter that on 3/4 the DowTheory gave a strong buy signal. Two weeks after your first purchase of the C fund at $13.00 giving you 3846 shares, your luck changes and now the market is headed lower and the C fund is following. The price is now $12.75 and you are a wee nervous because your holding is now worth $961 less than when you started. 3846x.25=961. But to the rescue comes your $1000 dollar cost averaging buying 78.43 more shares, 1000/12.75=78.43. You now own 3924.43 shares - life would be good if from this point the market were to turn around -but the market wants to see you suffer just a little. Your current account balance for the C position is $50,036 plus your remaining $50,000 in the G fund. The C fund is now dropping again and you definitely want to cut and run back to the G fund and preserve your cash. But our friend The Technician recommends you show courage and buy some more C fund now that it is at $12.50 - if you do this you are leveraging down and subsequently hurting yourself. This is the part I really like - the pain. So your realize that your account just lost another $.25 from the C fund. But remember you now own 3924.43 shares worth $49,055. You are loosing money down $981. Well how much to buy at the $12.50 price. You are brave so $25,000 comes out of G fund to buy the C fund for $12.50 = 2000 more shares. You now have 3924.43 + 2000 = 5924.43 And now comes your $1000 dollar cost averaging money to buy another 1000/12.50=80 shares. You total has just gone up again to 5924.43 +80=6004.43 shares for net of 6004.43x12.50=75055.+ $25000 left in the G fund. This equals 75055+25000=100055., down from your original $100,000 + 2000 more.102,000-100055=1945 loss on paper. And finally the good part begins - you decide that someone may be correct and the market will return upwards. But first you have to experience a panic selloff and the C fund drops to $12.00. The wise Technician says don't cry and just buy more. Your present position is worth 6004.43x12.00=72053+25000=97053. 102,000-97053=4947 loss. So you realize this guy knows what he is doing so you spend another $25,000,the last of your G fund reserve. 25000/12.00=2083 shares. 6004.43+2083=8087.43 shares.And don't forget our $1000 that comes like clock work - 1000/12=83.33 shares for a grand total of 8170.76 shares. Total money in now is 103,000 minus 98049=4951 loss. And your lucky day arrives and the market starets to rally - in two weeks the C fund is back to $12.50.And you purchase another $1000/12.50=80 shares for a grand total now of 8170.76+80=8250.76 shares.Your losses are now starting to shrink- 104,000-103134=866. To make a long story short the C fund runs back to $13.00. and you are now at $107259 and closing. At $13.50x8250=113775 and begins to increase fromthere. The numbers might be off in places but you should get the general idea of how dollar cost averaging works along with leveraging down

 

[Randy]

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WOW. That is a lot of info. to swallow. I will have to read a few times but I def. get the jist of it. I thankyou for taking the time to explain it so indepth. And I thought this would be easy. Ha.Ha. Thanks again...

 

[rokid]

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Randy,

It's not hard.

If you like risk and the TSP is your only significant investment, move all of your G Fund money to the L 2040 Fund and forget it. The L Funds provide diversification, automatic rebalancing, and automatic asset allocation adjustmentover time.

However, look at the L 2040 risk, i.e. standard deviation. Although you have to take on risk to achieve a high return, losing 20-30% of your money in one year can be very painful and lead to panic selling. On the other hand, a 20-30% gain is very nice.

If you're considering active management, i.e. market timing, watch the board and check the running Tally of TSP investors todetermine who is doing it successfully.Successful market timing is very difficult! :^