Search:

Custom Search

Readers' Comments

Total Comments: 28
Page 1 of 3

« Previous | Next »

Frequent Trading in the TSP

The most appallingly bad TSP advice ever offered

n/a
n/a
Tue Jan 8, 2008 10:39 PM

Post Reply

Congratulations, Mr. Donoghue, for assembling some of the worst advice ever offered regarding the TSP. There is so much bad information packed into a small space that I can only highlight a few points:

1) Quoting 7-year S&P 500 returns from their absolute peak at the beginning of the century is dishonest and misleading. You can quote them from the bottom of a bear market to make them look spectacular. Every honest commentator quotes returns over a longer time period.

2) Followers of Jack Bogle's low-cost, passive investing approach don't just have their "beliefs", they have 50+ years of failures of active investing to beat their returns (once costs are factored in).

3) Short funds are perfect if you can time a bear market. Since no one can, adding them to the TSP would come as close as possible to guaranteeing participant's losses. By contrast, the G Fund is an ideal diversifier to stocks since it never goes down.

4) Your firm's 1 to 2.5% advisory fees are egregiously high.

Re: The most appallingly bad TSP advice ever offered

William Donoghue
W. E. Donoghue & Co., Inc.
Mon Jan 14, 2008 11:03 AM
I share your concerns with the performance time periods most frequently reported. It is equally unfair but is convenient to compare a performance period that does not include a full investment bull and bear cycle. I am suggesting that people use a "21st Century (since 12/31/99) performance period" to compare fund performance.
As we stand on the precipice of a potential bear market as we did in 2000, I think it is wise to understand the consequences of buy-and-hold.
Mr. Bogle has already retired and can well afford to invest in bond funds in what will likely be a rising rate market (a losing situation) and domestic stock funds (a possible losing situation which will likely dramatically underperform selected foreign stock markets at greater risk). You may not have that luxury.
White is not Black; it demands different strategies yet most investment alternatives refuse to protect your money in down markets.
Bill Donoghue

Re: The most appallingly bad TSP advice ever offered

INSPECTOR/TEACHER
DoD
Wed Jan 16, 2008 10:32 AM
TSP trading should be allowed since the ones who have loans are very limited in the amounts they can gain compared to TSP investors with no outstanding loans.
If your in a financial crunch and need Help on very high 38% credit card debt ( MBNA & Fleet are masked robbers on their percentage & fees. & Still wanting more 6 months later after being paid off!!Emergency money is sometimes needed & TSP borrowers are penalized but now not allowed to make bigger gains by TSP trades when up swing is going!! BACK to my old 12% yearly mutual funds I guess!! TSP is getting over regulated & going down hill!!

Anlother failure of the article

Programmer
TSO
Wed Jan 9, 2008 7:20 AM

Post Reply

"Inverse funds" as the author calls them can be useful IF they are used properly... If they are not used properly they can wreck havoc on someone's retirement savings.

We all know there are a great many TSP investors who don't properly utilize the traditional offerings currently in the plan. This situation will be made even worse with uninformed investors trying to use unconventional offerings like inverse funds(which require a deeper understanding of the market).

Finally, somebody with some sense!

Budget Analyst
Army
Wed Jan 9, 2008 8:45 AM

Post Reply

Thank you so much for this excellent information! It makes perfect sense and was great advice. I agree that we should have an alternative for the bear market times - that is when I usually move to F and G funds, but F can still have down times even when stocks are down. I am so mad at the Board right now, if I could take all my TSP out, which I am fully vested in, and move it to a Roth IRA or some other investment vehicle that I can manage myself. But, it is what it is and I will deal with it as best I can. I would still really like to have someone explain WHY the "L" funds can be rebalanced DAILY by the TSP system, yet we as individuals will be restricted to twice a month. That just doesn't seem fair!

Re: Finally, somebody with some sense!

Engineer
USACE
Wed Jan 9, 2008 9:07 AM
Balancing is keeping the desired ratio's between the different portions of the C, F, S, C & I funds in the L funds to meet their overal target investment percentages, such as 20/20/20/20/20 (example only)

At the end of the day if the values are 19/20/21/22/18, then the only amounts that would be moved are that which would bring the funds back to their planned ratios. Therefore only a small percentage of the overall fund is moved each day.

Balancing is not moving 100% of one fund into another and back again at frequent intervals, which is what is occuring in the accounts of the heavy traders.

The two concepts are totally different, market timing versus account balancing to keep a consistent portfolio, and should not be compared to one another.

Re: Finally, somebody with some sense!

Programmer
TSO
Wed Jan 9, 2008 9:10 AM
As to your question of why - Each L fund has one set of transfers each day to rebalance(as opposed to the incorrect assumption by some that each investor in a L fund has their own set of transactions per day). Everybody in that L fund has a share of the rebalanced fund.

That is far different(and far cheaper) than many individual accounts being rebalanced daily based on many different reallocation percentages.

As far as a bear market fund - it's a good idea if it's used properly. It's a very bad idea if used improperly. Considering how many people don't use the current traditional funds properly, what are the odds that an unconventional bear market fund(which requires more knowlege) will be used correctly?

Terrible Article

Anon
SSA
Wed Jan 9, 2008 9:25 AM

Post Reply

This is a rather impenetrable article from a "financial professional." Read the last sentence again: "Taxable ETF portfolio might produce superior after-tax returns." A lot of things 'might' happen. What is he talking about?

And next: "the rare experienced proactive advisors who do manage separate accounts know that some objective trading is more than appropriate".

First of all I'm not entirely sure what that sentence means. But the idea that the average federal employee who doesnt have the same experience or training as the 'rare experienced proactive advisor' would be able to make the same wise decisions is laughable.

Lastly, for someone who puts such great stock in 'inverse stock alternatives'. He doesnt bother to explain them very well. Especially in light of the arcane & questionable concerns about other approaches, he should talk more about the very real dangers of inverse fund approaches.

Poor Article

Soil Conservationist
USDA
Wed Jan 9, 2008 9:46 AM

Post Reply

This guy says 'the law should be changed' on IRAs. Yeah, well 'the law should be changed' on a whole lot of different things. We need to be told what's going on & not what 'should' happen.

Extremely poor article.

THE BEST TSP advice ever offered

Manager
Labor
Wed Jan 9, 2008 10:15 AM

Post Reply

Many thanks for your contribution Mr. Donoghue!

Re: THE BEST TSP advice ever offered

IT specialist
DOD
Wed Jan 9, 2008 11:58 AM
This is by FAR the worst article I have read in the FedSmith!!

Frequent Trading in TSP by William E. Donoghue

Assistant District Manager
Social Security Adm
Wed Jan 9, 2008 1:20 PM

Post Reply

Thanks for the article. Now, once again, in English.

Total Comments: 28
Page 1 of 3

« Previous | Next »

Add a Comment about this Article

** All fields are required.
Note: Your comments will not show up right away. FedSmith.com selects the most insightful comments from our readers for posting. If selected, your comments will show up in the comments section after they have been reviewed and approved. See our terms of use for more information.