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Timing the Market with Your TSP Funds? Here's What Happened in Recent Bull and Bear Markets

Market Timing

Defense employee
Defense Logistics Agency
Wed Jan 5, 2005 9:03 AM

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People buy high and sell low. duh?

Imagine the opposite were true:
If everyone bought stocks when prices were low, they would cause the prices to rise due to supply and demand.

If eveyone sold stocks when they were high, they would cause the prices to drop, again due to supply and demand.

There is no way that everyone can buy low and sell high unless the market has a smooth upward climb - something that has never happened!

Timing via TSP

Retiree
National Weather Service
Wed Jan 5, 2005 9:09 AM

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And didn't the TSP facilitate attemps at market timing when the system permited daily movement between fund? There was much more protection against the mood of the moment when intra fund transfers were restricted to once a month.

The eveidence cited would be well absorbed by those viewing TSP as template for Social Security stock investment accounts. Investors making their own decisions don't always act in their own best interest.

Social Security

Defense employee
DoD
Wed Jan 5, 2005 9:14 AM

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1. It's not your money. Social security is an insurance plan, not a pension plan.
You can't pass it on to your spouse when you die.
You can't take it lump-sum.
You can't transfer it into an IRA.
Some of the money goes for disability insurance.
The money you pay today funds someone else's retirement today.
When you retire, the money to pay your retirement will come from someone else who is still working.

2. If the government plan is so wonderful (and it is), why aren't they suggesting that people have social security AND an investment program? That's what FERS employees have.

3. If the plan is to provide something for people who were either too poor to invest or invested poorly (some form of Social Security), how is that different? Will the new Social Security be only for the needy?

4. If people are allowed to invest for themselves in this new program, how is that different? Can't people invest for themselves today through IRA, SEP, Keough, 401k, 403c, TSP and so forth? Is the money that they pay into Social Security the only thing preventing them from saving enough for retirement?

Smith's Bias

Supervisor
GSA
Wed Jan 5, 2005 9:15 AM

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Ralph Smith's anti-union bias is no longer a surprise, but I confess I was taken aback by his labelling of today's Social Security system as "Socialism". That was the canard that they used against FDR when he first proposed Social Security, and it was used again against JFK when he first proposed Medicare.

In fact the privatization of Social Security accounts would mean the dismantling of Social Security. Today's beneficiaries are paid with the dollars contributed by today's workers. Remove those contributions and there's no money to pay the beneficiaries. The Bush plan destroys Social Security. Not down the road in the future. It destroys it immediately. Tell it like it is.

You want to play the stock market? Do it with your TSP or your broker. Use your own funds. But don't play with Grandma's retirement income. It keeps her off of cat food. And it will do the same for we who contribute today, but only if we can beat back this nefarious privatization plan.

Re: Smith's Bias

Reader
HUD
Wed Jan 5, 2005 11:45 AM
I noticed the socialism comment you are pointing out also when I read the article, but I fail to see how that constitutes an anti-union bias on the part of the author. Did you stop reading the article when you got to that part? In the very next paragraph it presents the conservative side of the argument, opposite the one you pointed out that mentions the "socialism" comment and the liberal view of the social security system. I guess my question is how is the author biased one way or the other when he presents 2 opposing sides of an issue? Just curious where you were coming from because it almost sounds like we weren't reading the same article.

Re: Smith's Bias

Supervisor
GSA
Wed Jan 5, 2005 12:53 PM
In answer to HUD Reader's questions: Ralph Smith's anti-union bias shows up in many of his columns. Follow them and you'll see.

My point was that I am used to seeing that kind of bias, but this time Smith's bias goes even further into right-wing field by using the label "Socialism" to characterize the Social Secuirty system.

I do not believe he presents both sides evenly. He pretends to, but I think a careful reading of his words shows his support for the Bush plan to privatize, and effectively destroy Social Security.

He presents the Bush side with noble words such as "hard work" and "the government should not be allowed to take that money away".

On the side in favor of keeping Social Security, he uses that ultimate curse word "Socialism" and saying that it assumes "people can't be trusted."

That's not presenting both sides evenly. That's bias.

Timing the Market

Management Analyst
US Army Garrison
Wed Jan 5, 2005 9:16 AM

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Since I started investing in TSP, I've invested 100% of my allocation into the C fund. When the stock market prices drop, I'm somewhat happy. I think about the increased shares that I'm able to buy. When I get closer to retirement, I'll move my money into a safer account. Until then, I just plan to let my investment grow.

Re: Timing the Market

zero percent gain in the C Fund since 1998.
faa
Wed Jan 5, 2005 1:00 PM

If you have invested your money every 2 weeks in the C fund since 1998 , you have earned zero percent!

The S&P 500 is at the same price it was in 1998.

6 Years of nothing.


Money invested in the G fund returned approx 50% since 1998.

C fund lost 43% from 2000-2003.

From 2000-2002 money invested in the F fund returned approx 30%.

3 interfund transfers from 1988-2004 returned approx 400%.

1988-2000 C fund, 2000-2002 F fund, 2003-2004 S I fund.

You have to know what is in the Funds and what makes them move, before you can be a good investor.

I am amazed that most people in the TSP have know idea what they are investing in.

I have some swamp land in florida I would like to sell. It could be in the S fund for all they know.

The Best way to lose money in the TSP is to put all of you money in one fund and walk away.

How many know that the Value of the US Dollar determings the value of the I fund?

It's a no brainer. Interest rates fall F fund goes up.

US dollar Falls the I fund goes up.

Earning in US companies increase, the Value of the C and S fund go up.

How simple is that.

Education is what Gov Employees need.

Wake up people. Your Retirment depends on it.




Re: Timing the Market

Grunt
HUD
Wed Mar 23, 2005 10:05 AM
Comments from faa where perfect, wish I had said it first.
Nice goin'.

new social security

M.T.
VA
Wed Jan 5, 2005 3:20 PM

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Perhaps a new Social Security could
be paterned after life-cycle funds.
The older you get- the more
conservative the investments.

Re: new social security

Analyst
DOD
Mon Apr 4, 2005 11:40 AM
That is the default plan proposed for those who want the exercise the personal account option but don't want to make investment decisions on their own.

It's an excellent idea, allows the everyday citizen to reap the benefits of long term market investing without having to make any investment decisions along the way. Therefore, the horror stories brought about by bad investment decisions will be avoided.

Porfolio-Balancing Solution

Grant Manager
HUD
Thu Jan 6, 2005 10:13 AM

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Social Security must be preserved (and should be supplemented by individual savings) for the reasons outlined so cogently by Defense Employee.
TSP participants can simply and effectively counter the very destructive human tendency to buy-high-and-sell-low by using a "portfolio balancing" discipline;
1. determine your risk tolerance
2. establish portfolio consistent with that risk profile (high risk = higher % of your $ in the volatile stock funds, lower risk = lower % of your $ in fixed-income funds)
3. periodically (qrtly or yearly), "rebalance" your portfolio by transfering $ from the funds that have increased into funds that have not, to reestablish the original percentage allocation of funds consistent with your risk tolerance.
This simple discipline virtually guarantees that you will buy lower and sell higher and avoid the destructive impulse transfers identified in the study cited above.
Education, and encouragment of savings is the key to retirement success, not gutting of SS to put the insurance piggy bank into the hands of easily-panicked investors.

Re: Porfolio-Balancing Solution

Life cycles
faa
Thu Jan 6, 2005 11:38 AM
Lets say I have 5 years to go before I can retire.

I sellect the life cycle for 2010.

This allocation will have me in the F Fund and G fund because I am getting close to retirement.

Most Fed's are getting with-in 10 years of retirment.

These are the people who need to increase their earnings, because they have been in the least returning funds since the beginning of the TSP.

Why are most of the people in the wrong funds?

Because the Fund information we receive at our work place is 3 months old when it arrives.

When people react to what they see in their statements and publications, they buy high and selling low.

Works every time.

By selecting the 2010 life cycle, they will be sure to continue to be in the least returning funds.

Interest rates go up, the F Fund goes down.

Do you think the G fund is going to 10%, or interest rates are going to fall below 3%? in the next 5 years?

The People putting these allocations together, don't need to know anything about the TSP or what's in your best interest because their job is to put us in preset allocations, reguardless of the long term market conditions.

Current Information and Fund education is what is needed.

I guess that's not in our best intrest or they would be providing this information.











Like the TSP says, Most people in the TSP are not interested, or have the time or brains to make good decisions.
Total Comments: 24
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