Thrift Savings Plan Talk

Longer Term Market Outlook

Updated January 2008

Mid Term Outlook (6 months - 1 year)

I am going to start 2008 off in conservative mode in this hypothetical inactive account. I will look for the air to clear before getting fully invested again. The charts are not looking particularly well and I would feel better keeping some powder dry while we see how things play out.

That said, I like buying when things look their worst, and we could see that in the next couple of weeks or months.

For this account, I will start out 2008 with an allocation of:

20% G
20% F
30% C
15% S
15% I

The long-term account ended 2007 with a +6.64% return. It was not earth shattering as it fell somewhere in between the returns of the TSP funds:

2007	Totals
G Fund:	+4.87%
F Fund:	+7.09%
C Fund:	+5.54%
S Fund:	+5.49%
I Fund:	+11.43%

The F fund was the surprise of the bunch, beating both the C fund and the S stock funds. Like 2006, the I-fund was again helped by a weakening dollar in 2007.

The credit crunch is still with us keeping investors on their toes. As I mentioned, sometimes it is better to buy when no one else wants to. Sentiment is low and we could be very close to a better buying opportunity, but the market does tend to go down longer / further than you might think would be reasonable. The same happens during long market rallies.

Things are looking bad and we may be hitting the fear and desperation area on the cycle of emotions, but I don't think we have seen any panic or capitulation yet. That may take time to develop.

2007 did experience the long overdue 10% correction I had been looking for. The question is, will it get worse? Will we actually experience a bear market (20% decline) before it's all over? I tend to think that will not happen. There are too many good things happening in spite of the credit situation and the possible recession. Interest rates are still very low and stock valuations are not a problem at all when compared to other investment options such as bond yields.

So, their is no magic formula for 2008. The market is working out some financial and economic issues, but a good buying opportunity will come sooner or later. That's when I will move back to a 100% stock allocation in this account. By then we should have seen a little more panic in the air.

Good luck!

Long Term Outlook (3 plus years)

Not much to say here except that I am bullish for the long term. Of course there will be swings over the course of three plus years but if you are not the type to watch the market on a regular basis and you do have three or more years before you need your TSP funds, stocks are the place to be. You can use the table below as a guideline, just consider your risk tolerance and also when you will need your money when choosing an allocation.

Allocation

If I were a long term investor not looking to make many allocation changes, I would still be close to fully invested. We are lightening up slightly on our 100% stock allocation early in 2008, and to wait for a little pullback before going back to 100% stocks down the road a bit. We will use the early January strength to raise 25% cash (G fund) in our aggressive, less active account. The moderate and conservative account have also lightened up some on stocks.

Here are some possible allocations for those with less active accounts.

2008 - Updated 1/02/08

Risk Tolerance	G Fund	F Fund	C Fund	S Fund	I Fund
Aggressive	20%	20%	30%	15%	15%
Moderate	10%	10%	40%	20%	20%
Conservative	20%	15%	35%	20%	10%

Remember, this is a less active, hypothetical account and it has done well over the years. But it is not what we do with our own personal TSP accounts. We tend to be more active. These would be basic guidelines for the longer term, buy and hold type of investors who make few transfers during the year.

TSP Talk is in no way affiliated with the U.S. government, or military Thrift Savings Plan, tsp.gov, or any other government agency. TSP Talk does not guarantee the accuracy or completeness of this report, nor does TSPtalk.com assume any liability for any loss that may result from reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice and are for general information only.

The information contained on this website is for educational purposes only and not intended to be recommendations, and may not be published, broadcast, rewritten or otherwise distributed without prior written consent from TSPtalk.com. Full Disclaimer

TSP Talk Market Comments About TSP Talk Premiums Site Map TSP Funds Message Board Returns