Commercial Financial Advice on TSP Investing

By on December 4, 2014 in Current Events with 21 Comments

Often, during the retirement seminars I deliver for Federal Career Experts, I am asked for recommendations on how an individual should allocate their TSP account.  I am not a financial adviser and do not pretend to be one, so I do not give suggestions, let alone recommendations, on the best way for an individual to mix up the funds within their Thrift Savings Plan account.

This article will discuss various TSP “allocation services” that are available to TSP participants.  We will look at how they allocate funds, how you are notified as to the proper allocation, what fees they have and other items.  The information below was gleaned from the websites of the allocation services.

TSP L Funds

The TSP has its own method of allocating investments within the individual funds.  The L (Lifecycle) Funds use the conventional investing wisdom of gradually getting more conservative in your investments the closer you get to when you will need the money.  Every calendar quarter the investment mix gets just a little more conservative, as money is moved from the three stock funds (C, S and I) into the government securities (G) fund.  The funds are rebalanced daily, down to the one-hundredth of a percent, to account for fluctuations in the value of the TSP funds.

The reallocations within the L funds are automatic and occur at the beginning of each calendar quarter.  One might call this type of allocation strategy “set it and forget it.”  The L funds do not respond to market trends, they just keep slowly getting more cautious in their investment strategy.

There are five L funds.  I’ve listed them from the most aggressive to the most conservative.  L 2050, L 2040, L 2030, L 2020, and L Income.  There are no fees for investing in the L funds, other than the underlying fees of the five basic TSP funds.  You can find out more about the L funds on the TSP website at https://www.tsp.gov/investmentfunds/lfundsheet/fundPerformance_L.shtml

TSP Safety Net

TSP Safety Net allocates your investments based on a trend analysis, comparing the performance of the individual TSP funds with a 40 week moving average of the market indices that the TSP funds follow (e.g., the S&P 500 for the C fund, etc.).  If a fund begins to trend above the average, it would be considered a signal to move into that fund, or to remain in that fund if you were already invested in it.  If a fund begins to trend below the average, it would be considered a signal to move out of that fund, or to stay out of it if you weren’t already invested in it.  They also use a “relative strength” analysis.

Participants in TSP Safety Net complete a short risk analysis questionnaire and are placed in one of five risk categories from “very conservative” to “maximum growth”.  They receive a weekly commentary on market performance and federal retirement and benefits.  Reallocation alerts are sent out as necessary when trends change.

A yearlong subscription to TSP Safety Net costs $149.99, but they are offering an annual rate of $89.99 through December 31, 2014.  You can find out more about TSP Safety Net at http://tspsafetynet.com/

TSP Pilot

TSP Pilot also uses a trend analysis to allocate investments among the five basic TSP Funds.  They use “dominant market theory,” “NC Alpha,” “Sharpe Ratio” and the “Ulcer Performance Index” in their trend analyses.  There are two risk tolerance levels available with TSP Pilot, “Standard” and “Aggressive.”

They send out email alerts when changes are deemed necessary, as well as market commentaries.  The frequency of the alerts and commentaries was not specified on their website.

TSP Pilot offers subscriptions of five different lengths.  The shortest is a one month subscription at $16.95; a one year subscription is $149.99.  You can find out more about TSP Pilot at http://tsppilot.net/

TSP Investing

TSP Investing provides a monthly newsletter that will provide advice as to whether any changes are necessary in your TSP allocations.  They utilize the C and G funds to the exclusion of the remaining TSP funds.

They follow trends identified by their own trading system, which is not described.  When the S&P 500 (the index tracked by the C fund) is trading above their trading “signal,” they advise you to move everything into the C fund.  When it is trading below the “signal,” they advise you to move everything into the G fund.  They do not use risk assessments to gauge where you should be invested, they simply move back and forth from the two most popular TSP funds.

TSP Investing offers a one month trial subscription and their normal rate is $15.95 per month.  When I was at their website, they were offering a special monthly rate of $9.95 per month and allow cancellation at any time.  Find out more about TSP Investing at http://www.tspinvesting.com/

Allocation Service Returns

When it came to comparing returns their subscribers would have achieved had they been enrolled in these services, two of the funds recalled 2008 (no surprise there) and one looked at 2013.  TSPSafetyNet had a chart that showed at which point subscribers would have been advised to get out of the S&P 500 in, and when they would have been advised to get back in.  TSPpilot compared the losses that their subscribers would have suffered in 2008 with losses they would have had if they had been invested in the “stock market.”  TSP investing pointed to their average 27% return in 2013.  The TSP L funds, as they do not follow trends, simply showed their monthly and annual returns since the inception of the L funds.

In my search of the web for TSP allocation services, I did find some more, but the ones listed above appeared to be the most understandable.

In the interest of full disclosure, I am affiliated with TSP Safety Net.

John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. The book is written in an easy to understand question and answer format and covers all areas of federal benefits from the perspective of an employee at various stages of their career. Order your copy at shoplrp.com.

© 2016 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.

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