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Market Timing and Your TSP

Market timing and Your TSP

Gene Shuman
State Department
Mon Nov 26, 2007 9:49 AM

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Perhaps the TSP should allow some small number of free transfers, perhaps two per month (exact amount TBD), but deduct the transaction cost from the transferee's account for any above that. One reason the "daily traders" are making money in the TSP is that all transfers are "free", although the transfer cost is apparently shared by all participants. Make the frequent traders pay full freight so the rest of us don't have to pay for their activity and fund their gains.

Re: Market timing and Your TSP

CR
SSA
Wed Nov 28, 2007 5:09 PM
I agree completely. Let everyone make as many trades as they want but after 2 a month the trading costs are deducted from their account.

Diversity for FRTIB

Manager
USDA
Mon Nov 26, 2007 10:05 AM

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It appears to me that the will of the participants has not been heard. When I look over the Credentials of the TSP board we do not have employee representation. I do not recall ever getting a ballot or any other device to choose the board or the director of our thrift savings or hire the Executive Director. When I look at the Make up of the board it doesn't appear to be very diverse either with names like (Andrew Saul, Thomas Fink, Gordon Whiting, Alejandro Sanchez, Terrrance Duffy and Our Executive Director Mr. Gregory Long. If you feel like we need a recall election Let Fed Smith know your concerns. If you feel like employees should have a voice on this board then lets see about opening up the board to 4 additional seats for employees and the Executive director is not the dictator. I feel like we need representation on this board. If you feel the same Lets Do the RECALL. Let your voice be heard in the board room of FRTIB. LET FREEDOM RING

Re: Diversity for FRTIB

Financial Analy$t
USAF
Mon Nov 26, 2007 11:16 AM
When it comes to my money, I prefer credentials and performance in the selection of an advisery board and not the PC line. I am sure there are funds out there whose managers are selected by the color of their skin and not thier achievements.

Re: Diversity for FRTIB

Manager
USDA
Mon Nov 26, 2007 5:03 PM
But I bet you didn't choose the board or have any input into their selection of the current board did you USAF Analy$t ????????

I didn't write any comments. but...

Engineer
FAA
Mon Nov 26, 2007 10:08 AM

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I made a considerable amount last spring (almost $10k trading around $60k of funds) for a two month period. That's a 100% annual return had I continued.

This is vs. the 10% or so if I "let it ride".

I doubt my numbers would have been that high if I continued the entire year, but they would have been more substantial than doing nothing.

The bottom line is, if you are willing to put enough time each night watching overseas markets (I did it all via trades from the I fund to the C fund and back), you can do very well.

Trading in some of your sleep, along with all your free time wasn't something I care to do full time. I was just proving to others that it can be done, and be done well.

Bottom line, if folks are willing to risk their own money, let them do it. Charge a fee for each trade over once a month. The money to be made will easily pay for that fee.

Re: I didn't write any comments. but...

Deportation Assistant
ICE
Mon Nov 26, 2007 10:38 AM
Totally agree with you. I, too, researched the international markets/stocks prior to and after US markets closed/opened, and lowered my risk when trading in and out of the I Fund. My total trades for 2007 were 14, seven in, seven out, of the I Fund, profiting substantially more than a hold position in the I Fund. I'm parked right now. While I agree that emotional trading will increase the risk of losing money in TSP Funds, there's always going to be a small percentage of investors in the TSP who can minimize the risk with specific strategies rather than emotions run amuk.

Re: I didn't write any comments. but...

Investigator
FDA
Mon Nov 26, 2007 12:57 PM
Another good comment, two free trades per month. Then if one wants to trade more frequently, that individual pays the fee, not everyone else. That way expenses are kept to a minimum and those that want to day-trade pay the price. Thousands of investors should not have to pay for the actions of the few. If you enjoy your commissions spread across all fund holders, instead of paying for yourself, you must also enjoy paying increased health care premiums in order to cover the health care costs of the uninsured or illegal immigrants—same principles apply there.

Frequent trading

Investigator
Dept. of Labor
Mon Nov 26, 2007 10:09 AM

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Out of the 3,000 or so frequent traders I'm sure there are at least 10 or 15 who consistently make money doing so. Although these individuals can provide us with great anecdotal information concerning their trading acumen, all they are really revealing is their ignorance. Studies show that even these people will eventually fall back to the average and likely even below. Those that feel otherwise should quit the government and take up day trading -- they should be able to retire in no time. If making money in stocks is so easy, why do stockbrokers advertise? They should keep quiet, make their fortune and retire. But because these frequent traders are costing the rest of us money, restrictions are necessary.

Re: Frequent trading

Investigator
FDA
Mon Nov 26, 2007 12:51 PM
I agree and thought the same thing. If someone has an algorithm that would help others make money on the TSP, that individual should quite their mediocre government job and do infomercials at 2:00 in the morning along with Tony Robbins and that crazy guy with the question mark jacket. There must be more substantial money to be made on selling products then day trading on a 401k could ever make!

Re: Frequent trading

Engineer
FAA
Mon Nov 26, 2007 2:47 PM
It's not a case of only a handful of individuals making money, it's a case of working very for the money you make in this manner.

Yes, I can make more day trading, if I choose to dedicate 20 hours of each day to it. I prefer to dabble in the market instead, have plenty of family time, and continue with Engineering (which I chose decades ago).

Anybody can make money. There's no secret, or magic to it. But it's a case of "Will spending all your waking hours, eating asprin and tums by the case, and ignoring everything around you make you happy?"

Even if you make a million dollars doing this, the time lost with family for the 2-5 years trading was more than I could afford, or cared to afford.

But don't discount what a little knowledge can do. Some simple correlations with overseas markets, a few simple charts and extrapolations, and anybody can do better with their TSP.

We don't, because we choose to spend out time doing other things.

TSP Restriction Benefit will go to court ! ! !

Statistician
DOD
Mon Nov 26, 2007 10:09 AM

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What a stupit closing !
" While a more restrictive policy will not benefit some participants, it is likely to produce better returns for the majority of TSP participants who do not trade on a regular basis. "

Do you realize the half million participants on all the five L - Funds are the ones causing the increase on the fund management cost ?

Re: TSP Restriction Benefit will go to court ! ! !

manager
DoD
Mon Nov 26, 2007 10:22 AM
I think if you look at the report from the TSP, you will see that the L Fund is not the problem.

The L fund rebalances as one large fund--not several thousand individual trades in the most expensive fund (for the reasons given in the report).

No doubt, some who like to trade want everyone else to pay for their gambling problem. Most of us just want to have a good retirement system and the tSP is apparently trying to protect us.

Re: TSP Restriction Benefit will go to court ! ! !

Citizen
USA
Mon Nov 26, 2007 11:38 AM
manager, you might want to rethink your "gambling problem" comment.. It is true that for most people an intelligent buy and hold allocation will produce the best long term results. However.. there are a few people who get good returns by switching funds more frequently based on economic trends (difficult but it can be done). To accuse those people of having a gambling problem is uncalled for.

Re: TSP Restriction Benefit will go to court ! ! !

DUSM
DOJ
Mon Nov 26, 2007 4:45 PM
Hey manager!!! How do you think the I fund is bought and sold each day? That's right, just like the L funds -- in one package deal. Get educated before you speak else you will reveal your true ignorance. Makes me wonder why you are the manager and the person you responded to is just a statistician in the DoD.... Yep, you guys promote incompetence as well.

Market Timing

SIO
US Army
Mon Nov 26, 2007 10:21 AM

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A compromise on this issue might be to create separate categories of investment options. On category would represent buy and hold, with the current cost structure, and the other category market timing, with an approbpriately higher cost structure.

Then anyone who expects to be able to time the market could try to do so, and pay the price for such behavior, rather than spreading the cost to those who do not engage in frequent trading. Each participant could get an individualized approach to TSP, without unfairly sharing the burden of personal activity across all share holders.

There could even be tiers of activity, with appropriately structured costs. In fact, the tiers could help the fund managers anticipate the level of activity in a fund, which in itself would keep the costs down for all participants.

Re: Market Timing

General Engineer
DOT
Tue Nov 27, 2007 9:48 AM
I think this sounds good in theory, but will not work. The management costs of such a system would be quite high and it would probably take a considerable amount of time to develop such a system. Furthermore, because we are one large pool of investors helps to keep costs down. The best solution is to charge a fee for excessive use. Excessive would need to be defined and I've heard more than 2 per month thrown out. Perhaps it should be more like 3 or 4 and beyond that would trigger a fee.

Cramer's (CNBC) take on buy and hold:

Manager
Labor
Mon Nov 26, 2007 10:36 AM

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...If anything, buy and hold is a completely reckless and irresponsible strategy. This is why I have always preached "buy and homework." There's nothing wrong with buying a stock with the intention of owning it for years, as long as you're willing to check up on that stock every week to make sure that your thesis for owning it hasn't fallen apart. Too often people regard buy and hold as a license to pay no attention to their investments and hide their heads in the sand when things turn sour...

Re: Cramer's (CNBC) take on buy and hold:

Citizen
USA
Mon Nov 26, 2007 2:51 PM
This excerpt indicates that the context of Cramers viewpoint is in buying and selling individual stocks. If you are in that environment then yes, Cramer is right. However TSP investors are not in that environment.

The context of the TSP indexed based funds that hold hundreds if not thousands of stocks, the proportion of any one company’s proportion in a fund in mathematically determined and maintained by the index. In this environment it’s possible to make good long term returns with an intelligent buy and hold allocation, it’s also possible(although more difficult) to make good long term returns with a market timing strategy. The assertion that one of these approaches is completely reckless and irresponsible in the context of the TSP is wrong.

Re: Cramer's (CNBC) take on buy and hold:

Investigator
FDA
Tue Nov 27, 2007 9:30 AM
The first thing I thought of when I read your post was you are exactly correct--when it comes to owning stocks; there you buy low and sell high. That is how you make your money in stocks (minus the commissions and taxes you pay on your trades).

However, the TSP is a fund-based system where you don't have to do the trading; it is already done for you by asset managers. A mutual fund (a.k.a., what the TSP is) is designed for greater ability to diversify your money amongst multiple stocks/sectors. No one in their right mind goes to E-Trade to purchase mutual funds for day-trading. ou won't make the kind of money in mutual funds that you would in stocks, plain and simple. For those who think they can time, and beat, the market, dabble in stocks instead. By trying to work the TSP you are just proving you have no idea what you are doing.

As for your Cramerism, I think you had better listen a bit closer and note if he is talking stocks or mutual funds.

MUTUAL FUNDS ARE NOT STOCKS!
Total Comments: 114
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