Last Month's Best Fund Method Strategy

**McDuck** · 04-10-2008, 09:45 AM

A friend told me about a TSP-fund IFT-strategy that someone else (person B) told him about. Person B said it performed 5 or 6 times better than any other strategy that he analyzed.

It is a very simple strategy. It consists of: at the beginning of each month IFT into the fund that performed the best the previous month (i.e., at beginning of July IFT into the fund that performed the best during June.)

I back-tested it for the years 2001 thru 2007 (2001 was the first year with all 5 funds.)
Using this strategy over those 7 years gave a return of 114%.
Staying in the I-fund the same years returned 74%.
The S-fund returned 69%.
The F-fund returned 49%.
The G-fund returned 38%.
The C-fund returned 25%.

Supposedly, person B has been using this strategy for several years with success. It seems too simple. But I can see why it would work. And it does take the emotions out of IFTing and it would fit in any restricted-IFT rules that they throw at us.

This strategy could also be back-tested all the way back to the beginning to TSP using the G, F, C funds. I haven't done that yet.

Also, staying in a fund (that performed best the previous year) all year seems to be a very good strategy too.

Of course, all of this is taking the multi-year view.

Attached is the Excel worksheet that I used.

**squalebear** · 04-10-2008, 10:23 AM

Information we can all use ! Thanks so much !

Back Testing during a Bull Market looked great.
I wonder if it will hold true since the TSP began.
Are you going to Test further. If so, I can't wait
to see the results. Again, Thanks A Million !

**McDuck** · 04-10-2008, 10:36 AM

2001 and 2002 were bear market years.

After the first 3 months of this year, this method is up 0.8% while all 3 of the stock funds were down 9.0%

**squalebear** · 04-10-2008, 10:53 AM

Originally Posted by Greg

2001 and 2002 were bear market years.

After the first 3 months of this year, this method is up 0.8% while all 3 of the stock funds were down 9.0%

Totaly Cool Stuff, Thanks

**Braveheart** · 04-10-2008, 10:56 AM

OK THX for the Info: So what Fund is the best for April based upon March the only Fund was the F Fund that performed well is had the highest % gain. Is that the pattern you are looking at.

In March the I Fund was up but % goes to the F Fund.

**McDuck** · 04-10-2008, 12:35 PM

Originally Posted by Braveheart

OK THX for the Info: So what Fund is the best for April based upon March the only Fund was the F Fund that performed well is had the highest % gain. Is that the pattern you are looking at.

In March the I Fund was up but % goes to the F Fund.

The March indicator is really a tie. G was 0.32% and F was 0.33%. Technically it should be the F-fund.

**nasa1974** · 04-10-2008, 01:08 PM

Very interesting! Something to track for a little bit and try and get a warm fuzzy. Thanks for the information.

**squalebear** · 04-10-2008, 01:21 PM

Originally Posted by nasa1974

Very interesting! Something to track for a little bit and try and get a warm fuzzy. Thanks for the information.

Greg's Avitar is warm and fuzzy ! I'll be looking into this a bit as well.
Keep us posted on this endevor, It sounds profitable !

**nasa1974** · 04-10-2008, 02:46 PM

Originally Posted by squalebear

Greg's Avitar is warm and fuzzy ! I'll be looking into this a bit as well.
Keep us posted on this endevor, It sounds profitable !

Sounds almost too simple. Would be interested in some of the other top movers input. Squalebear Have a good day.

**squalebear** · 04-10-2008, 02:52 PM

Originally Posted by nasa1974

Sounds almost too simple. Would be interested in some of the other top movers input. Squalebear Have a good day.

I agree, warm & fuzzy is never simple. I look forward to seeing others imput as well.

**RPM** · 04-10-2008, 04:04 PM

Originally Posted by Greg

Attached is the Excel worksheet that I used.

Thank you for the analysis. I am sure if we look hard enough, we'll know why it works, and the reason will make it less "simple"

Although I really like the simplicity of this approach. Would appreciate getting the info if you do back test to the beginning of TSP.

TIA

**malyla** · 04-10-2008, 07:02 PM

Originally Posted by RPM

Thank you for the analysis. I am sure if we look hard enough, we'll know why it works, and the reason will make it less "simple"

Although I really like the simplicity of this approach. Would appreciate getting the info if you do back test to the beginning of TSP.

TIA

Just tested this method from Jun 03 to present (share prices inception). As a buy and holder with 85%C and 15%S starting in Jun 03 I would be about 54% gain on my initial investment on Jun 2003. As of today, I'm really only 44% gain on my initial investment of Jun 2003 due to some bad I fund/G fund timing with transfers. (I track both my buy&hold and trading strategies). The last month best fund method at first did not look like it was going to work as the 2003-2005 showed that I was missing massive gains by looking to the last month best fund, but after finishing the whole spreadsheet (using Tom's) with some adjustment to federal paydays as the start or end of a month to initiate a transfer, the following conclusion jumps out. I would be up 128% on my Jun 2003 investment if I had followed this 'last month best fund' method. And my current balance would be almost double what I have now.

Why has no one (TSP, employer, etc...) ever mentioned this before? The last 4 months would have been made mute as this method had us out of stocks during the big drop from Dec 07 - present. Also missed the drops in March-April 2004, June-July 2006, July 2007. Missed some gains as well (Oct 2003, May 2004, Aug-Sept 2004, Feb 2005, May 2005, Nov 2005, Mar 2006, Aug 2006, March 2007,and Aug 2007), but it's the drops that affect the rate of return the most.

Very interesting. I do appreciate all that this website has taught me and look forward to more illuminating ideas and methods.

Good luck all. Currently 100% G.

malyla