and bond market volatility can be confusing and frustrating to many
investors. Is it safe to be in stocks right now? Should you
flee to the safety of fixed rates? Will small capitalization
stocks or international funds outperform the S&P 500 index in the
No one can be certain about any of these
questions, but when it comes to investing, making no decision is often not
the right answer. You have to react to what the market is telling you.
We look at a series of market indicators daily to help give us a better
understanding of what the markets are telling us at any given moment then
utilize this information to predict future movement. It is impossible
to always be right but we try to take
the guess work out of asset allocation by doing what appears to have the
highest probability for success.
Unfortunately, many participants took
their lumps during the bear market of 2000 to 2002, then
took cover under the safety of the G fund while the market rebounded
strongly in 2003. It is only natural to try to avoid risk and seek
shelter after witnessing the carnage of a bear.
the above scenario sounds a little like your situation, TSP Talk might be
able to help. When is it OK to stick your head out and plant those
seeds in stock funds again? How do you know when the market is
getting too high and its time to take your profits?
We can help.
Not surprisingly, the slow and steady G
fund outperformed all of the stock funds during that three year bear market,
while the sometimes flaky F fund (bonds) nearly doubled the return of the G
fund over the same period. But the bear market ended in 2002.
Yet 55% ($65 billion) of the TSP's $118 billion balance was still invested
in either the G fund or F fund with each gaining only 4.1% in 2003. In
2002, a 4% gain would have been the envy of the neighborhood, but 2003 was a
In 2003, less than 3% of the $118 billion
was invested in the S Fund (small cap fund) and less than 1% was in the I
fund (International stocks). The S fund was up 43% in 2003 and the I
fund was up 38%! Who knew? When I read those figures, I decided
it was time to create this site. As I mentioned, I'm no expert.
But I want to try help those that don't know where else to turn for
information. 2004 was a similar
story but TSP Talk readers were able to make some nice gains rather than
settling on the G fund returns during the recent bull market.
for investors who don't want to watch their accounts. That may be the
best strategy for some people, but not me. When I see signs that
stocks are too high or the economy is weakening, I'd like to have my TSP
account in a safe fund. When the economy starts to accelerate again or
stocks are looking cheap, I want to take advantage of the bull market by
getting completely invested in stock funds.
The S&P 500 was actually
down 6.7% from 2000 - 2005 while my account managed a modest 15.22%
gain during that same period. It's not always easy and of course past
performances are no guarantee of future results. I document my
transactions along with their results and post them on the
year returns pages.
So check out our free daily
Commentary and see what
we’re talking about. We will give regular updates of what we are thinking
and premium members will
know where we are putting our money. Whether you are thinking
long term or are planning to retire next year, we will tell you what we are
seeing to help you make better decisions as to which funds might be best for
your retirement savings.