Thrift Savings Plan Talk

Why my approach has to be different than RevShark's

When I asked RevShark if he would be interested in writing a daily column for TSP Talk, it was because I had followed him for many years and he had one of the best "feels" for the market than anyone I had ever read. He is also a master technical analyst. But RevShark is a stock trader, not a fund trader with a deadline so I have to approach investing slightly differently than he does.

Since we do have that deadline to contend with, I feel we must be a little more anticipatory rather than reactionary. Rev has been very bullish during this recent rally, as many of you have, and because of that you were both able to add nicely to your yearly returns. The difference is that an individual stock trader can change his position in a few minutes. As of yesterday afternoon RevShark is turning a bit more defensive, raising cash, and doing a little shorting (betting some stocks will go down.) He is still bullish for the longer term but is now playing for a pullback.

When we decide to change our tune, we can only hope that we make our decision prior to the 12 noon ET deadline otherwise we have to stay put for at least a day and a half. A lot of damage can be done in a day and a half when the market does an about face.

The one year chart of the S&P 500 below shows at least four instances where the market peaked, and dropped quickly enough to erase at least a week or two of gains in a matter of a couple of days...

Chart provided courtesy of www.decisionpoint.com

We can't just jump out after lunch and wait things out on the sidelines. If you are in stocks, and small caps and the I fund can be even less forgiving, you have to withstand almost two days of uncertainty and possible large losses.

I'm not making excuses for my cautiousness. I just wanted to point out why we may have to approach things a bit differently. Nothing against RevShark because he is great at what he does. If you trade or invest in individual stocks, he is an invaluable source. If you don't, glean what you can from RevShark because he is very good. Just understand that there is a difference in what we do.

The market took a long needed break Tuesday and no one knows exactly how much of a pullback we may get. I suggest you come up with some sort of a plan of action so that you don't have to depend on an emotional decision during the heat of the battle. If you are on the sidelines as I am, you may decide to move 50% in on a 1% or 2% drop, and the rest on any further strength. You can use the support lines in the above chart as buy points, etc. What will you do if the market heads right back up?

Having a plan tends to cut down on the anxiety. We are all in different investment situations so we may all have different plans. Stay in your comfort zone.

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That's all for today. Currently 100% G fund. Thanks for reading.