Good Evening,
The problem with the TSP system started several years back when the Thrift board decided to limit the number of trades permitted to two per month. At the time, a nice lady (whose name I cannot recall) called me to explain the changes to me. It seemed she was aware of our newsletter and was also aware of the fact that I was encouraging the members of our group to call the Thrift board and complain about this restrictive policy. At the time, we were making much more money than can be made now, as we were able to average in and out of positions rather than go all in or all out as we have to do now. Anyway, I asked her why the thrift board would even consider such a policy and she explained that it had to do with the cost of running the program. Each trade made increases the cost that has to be shared by the group as a whole. The domestic funds which include the F, C, and S funds increased the cost some, but the fund that the Thrift board was most concerned with was the I Fund. There are extra expenses that are required to trade stocks in foreign exchanges that make it more expensive to operate a fund like the I-Fund. At the time that this all took place it was extremely popular to time the I Fund on a day to day basis. A lot of skilled traders within the TSP system were looking at indicators such as the foreign markets that opened the night before our trading and were timing the I fund with a great deal of accuracy. For the most part, traders were moving 100% of their funds in and out of the I Fund several times per month which was increasing the management costs that were being spread evenly across the thrift system. The lady’s contention was that the Thrift board felt it was unfair to the TSP participants that were not trading so often to share those costs. She even insinuated that it was not a good trading practice to move the money so often anyway, that the TSP system was not meant for day trading. I begged her to consider a small fee per trade. In other words to allow so many trades for free and charge a small fee for every trade after that. That is what most brokerage firms do (Our firm charges an annual fee based on a set percentage of your account which is comparable to TSP and does not limit your trades!).
Well, you already know the rest of the story. We were restricted to two trades per month and our profits were restricted as well. Yes, I made some money in TSP, but I never again made over 40% as I had done that year. Fast forward to today. The Thrift Board policy of two trades per month basically forces you to buy and hold to a certain extent. Yes it is true that you can make an unlimited amount of moves to the safety of the G Fund, but after two of those moves you are restricted from moving back into equities for the rest of the month. As a result, when the market becomes volatile as it is now, and you are forced to move your money as a result, you are often caught leaning the wrong way. Since you are unable to average in and out of a position as you could before the trading restrictions, you are forced to be either 100% in equities or 100% out of equities and no matter how good you are, you will ultimately get punished when the market suddenly takes off in a new direction. So why not stay half in and half out all the time? You limit your profits, as one side is almost always down while the other is up. The only way to maximize your profits is to have all or the majority of your money in the right place to match the current market trend. That’s what we are forced to do. It is extremely frustrating when you are out of trades and sitting in the G fund and watching the market leave you behind, knowing there’s nothing you can do about it. Which brings me to my main point. The TSP system may not force you to buy and hold all the time, but it does force you to take chances that you should not have to take to make a decent return. So when we go through a period of volatility like we are having now everyone suffers. Sure, there are people that made lucky guesses and are up five or six percent as of this date, but the fact is that they are not managing their money, they are gambling. If you look at their returns over the past several years, they are never as good as the average. I am telling you all this so you will understand the nature of the TSP Beast. You can leave your money in the G fund all the time and make a couple of percent a year and retire with a few hundred thousand less or you can play the game by the Thrift board’s rules. That is what we do. However, that is also the reason that I removed my money from TSP as soon as I retired. I prefer to be able to move my money effectively all the time without taking the chances that TSP forced me to take. The result is that I make better returns 100% of the time than I could in TSP. Yes, I do this on the street and I would love to have you all as clients at our firm, but I really don’t care where you go as the Lord will provide for me either way. I just want you all to have the retirement that you have worked so hard for and deserve.
Nasdaq up for sixth straight day
| 02/12/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.3282 | 15.9607 | 23.5601 | 33.4499 | 25.2489 |
| $ Change | 0.0009 | -0.0312 | 0.0056 | 0.1478 | 0.1095 |
| % Change day | +0.01% | -0.20% | +0.02% | +0.44% | +0.44% |
| % Change week | +0.03% | -0.33% | +1.30% | +1.63% | +1.42% |
| % Change month | +0.08% | -0.19% | +2.21% | +1.28% | +2.92% |
| % Change year | +0.29% | +1.39% | -1.32% | -0.66% | -1.23% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 16.8294 | 21.7137 | 23.3263 | 24.6618 | 13.9443 |
| $ Change | 0.0052 | 0.0221 | 0.0313 | 0.0392 | 0.0259 |
| % Change day | +0.03% | +0.10% | +0.13% | +0.16% | +0.19% |
| % Change week | +0.28% | +0.71% | +0.91% | +1.05% | +1.19% |
| % Change month | +0.50% | +1.21% | +1.50% | +1.69% | +1.91% |
| % Change year | +0.08% | -0.38% | -0.57% | -0.69% | -0.85% |
