Stock 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 coming months?
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 some of the guess work out of asset allocation by doing what appears to have the highest probability for success.
I started this website many years ago after seeing that many of my co-workers talk about taking 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, basically because they just didn't know what to do and / or didn't understand what was happening. We saw the same thing happened in 2008, and a few times since. It is only natural to try to avoid risk and seek shelter after witnessing the carnage of a bear.
If 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 in 2000 - 2002, 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 different story.
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.
The COVID crash and recovery was another tough time for investors, and even the most experienced market timers had a difficult time negotiating the economic decline and the excess stimulus that eventually caused high inflation in 2021 - 2022.
Diversification is 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.
It's not always easy to time the market, and some say it's impossible. Of course past performances are no guarantee of future results, but we document our results and post them on the current returns and
prior year returns pages.
So check out our free daily Market 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 own 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.
Thanks for reading,