Thread: Trading TSP Funds: Follow-up and Survey results

Here is a copy of the e-mail I sent Mike and I posted it as a comment on his article.



Do your homework!

Read the FRTIB (TSP Board) minutes. The cost that the board is concerned about is NOT due to trading cost associated with frequent trading. You are insinuating that frequent traders are costing everybody a lot of money which is NOT the case. Our TSP administrative cost have gone DOWN from 6 basis points to 3 basis points over the last 5 years.

The real cost is the "Fair Valuation" associated with the I-fund. This is caused in a volitile market when the closing price of the I-fund and the opening prices in overseas markets differ significantly. This is caused by overseas markets being closed when TSP interfund transfers are settled at the end of the day. This volitility will even itself out over time (as has already happened this year). Back in March the TSP had a big surplus when markets overseas opened lower than expected after a highly volitile day. Then in June-July the pendulum swung back the other way. Remember: The L-fund rebalances DAILY. That's a lot of trades.