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Thread: Alternate LMBF methods

  1. #121

    Join Date
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    Default Re: Alternate LMBF methods

    Quote Originally Posted by Cactus View Post
    Here are the monthly returns as of 5/29/2014.

    Date G FUND F FUND C FUND S FUND I FUND
    29-May-2014 0.19% 1.23% 2.16% 1.82% 1.67%
    The best fund is C so the following IFTs take place before noon eastern Tomorrow, 5/30/2014:

    LMBF-1 changes from the I Fund to the C Fund
    LMBF-1 SIM Remains in the F Fund through October
    LMBF-1 C>S changes from the I Fund to the S Fund
    LMBF-1 CI>S Remains in the S Fund

    Looks like we are getting even more separation between the funds this month.
    Quote Originally Posted by ILoveTDs View Post
    Thanks for keeping the thread alive Cactus
    +1 I love this thread, this is a great opportunity for the casual investor to steer clear of the large downtrends. I can't remember what the back-tested results were, if you ever get a chance, please post them again since there are always new members needing to learn.
    Retired, 55G/15C/15S/15I (Paper Trading)_ BLOG: Stats for March, Stats for Q1, 2024 Stats

  2.  
  3. #122

    Default Re: Alternate LMBF methods

    Quote Originally Posted by JTH View Post
    +1 I love this thread, this is a great opportunity for the casual investor to steer clear of the large downtrends. I can't remember what the back-tested results were, if you ever get a chance, please post them again since there are always new members needing to learn.
    A co-worker turned me on to this site and the LMBF thread and I was hooked. Along came Cactus with the "alternatives" and was blown away with his calculating prowess. These two threads are worth the price of admission alone.

    Great job, and I am so appreciative that you are willing to hash out the numbers for the different whacky variances some of us come up with. Thanks so much!

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  5. #123

    Default Re: Alternate LMBF methods

    Regarding the back-tested results, here are 10 years of annual returns for our TSP Funds and these methods.

    G F C S I LMBF LMBF-1 C>S CI>S SIM
    2004 4.30% 4.30% 10.82% 18.03% 20.00% 13.00% 14.50% 15.47% 16.46% 16.51%
    2005 4.49% 2.40% 4.96% 10.45% 13.63% 2.38% 5.68% 5.68% 1.91% (3.66%)
    2006 4.93% 4.40% 15.79% 15.30% 26.32% 7.07% 17.85% 22.83% 18.46% 21.03%
    2007 4.87% 7.09% 5.54% 5.49% 11.43% 10.97% 10.51% 11.45% 8.11% 3.95%
    2008 3.75% 5.45% (36.99%)
    (38.32%) (42.43%) (11.06%) (10.15%) (9.52%) (7.64%) 1.22%
    2009 2.97% 5.99% 26.68% 34.85% 30.04% 9.66% 18.05% 28.17% 38.86% 10.67%
    2010 2.81% 6.71% 15.06% 29.06% 7.94% 12.85% 17.35% 17.35% 14.38% 28.53%
    2011 2.45% 7.89% 2.11% (3.38%)
    (11.81%) 12.22% 8.69% 8.69% 11.78% 14.95%
    2012 1.47% 4.29% 16.07% 18.57% 18.62% 19.27% 23.60% 28.78% 24.56% 18.40%
    2013 1.89% (1.63%) 32.45% 38.35% 22.13% 9.21% 12.26% 13.50% 22.70% 14.31%
    The original posting was here: Post #104 and also included running totals and some stats on the 3, 5 & 10 year returns.

    If you are interested in the monthly performance of these methods you can find tables showing 10 years of this data here: Post #102

    Finally, if you need a reminder on how these methods work, check that out here: Post #97
    Allocations as of COB Dec 28 : 100% S. | Retirement Date:Dec 2025
    Past Returns:
    2020 31.85%,2019 27.97%,2018 -3.36%,2017 13.10%, 2016 -1.79%, 5Yr Avg 12.61%

  6.  
  7. #124

    Join Date
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    Default Re: Alternate LMBF methods

    Damn... been so busy with life that I forgot about my IFT for June. Submitted. Not going to fret as one day difference is a make or break. Presently trying to get our new home liveable. Builder is over a month late and is scrambling to get it all finished, permits and CoO's done by Friday. Once we're in and settled, life will be more relaxing... retirement is a beautiful thing.

  8.  
  9. #125

    Default Re: Alternate LMBF methods

    Good to hear that life is good and has been keeping you busy in retirement, Hallatauer. Still, it will be better once the new house is done.

    As for the June IFT, you are right, there's nothing to fret over. It's just like moving from LMBF-1 to LMBF for June.

    LMBF should also be in the C Fund for June.
    Last edited by Cactus; 06-02-2014 at 07:35 AM. Reason: Added LMBF's allocation for June
    Allocations as of COB Dec 28 : 100% S. | Retirement Date:Dec 2025
    Past Returns:
    2020 31.85%,2019 27.97%,2018 -3.36%,2017 13.10%, 2016 -1.79%, 5Yr Avg 12.61%

  10.  
  11. #126

    Default Re: Alternate LMBF methods

    Hey Cactus,

    Not sure the juice is worth the squeeze for this one, but....

    Any chance I can beg you to run another variance to the family? What if we went to F when the G fund comes up the winner? Like how there's C-->S or CI-->S, the system does G-->F. Just eyeballing the data, it seems to catch some potential whipsaw action between the two most conservative funds.

    Thanks!


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  13. #127

    Default Re: Alternate LMBF methods

    Jonfresno, I'll look into G-->F after I finish the latest back-testing I'm working on.

    It bothers me that we don't have daily price data for our Funds past June 2003. That's why all my back-testing goes back to 2004. It's the last year with complete daily data. I always wanted to go back to 2000 to see how LMBF performed during the dot-com bust. I think I found a way to do that.

    I do have monthly data that goes back to 1988. I can use that to back-test a version of LMBF that has zero latency. That is, I use the previous month's whole month return to determin next month's whole month investment. We can't actually trade like this, of couse, since we are always at the mercy of the 1 day lag (latency), but I'm hoping it's a good indicator of the LMBF methods in general and can be used to show how they behaved before 2004.

    So far it's looking pretty good. LMBF0, as I call it, is in the same ball park as LMBF & LMBF-1 for 2004 - 2013. It also appears to have done a good job of stemming losses from the dot-com bust. I'm going to compute returns back to 1988 and post them here after I double-check my numbers.
    Allocations as of COB Dec 28 : 100% S. | Retirement Date:Dec 2025
    Past Returns:
    2020 31.85%,2019 27.97%,2018 -3.36%,2017 13.10%, 2016 -1.79%, 5Yr Avg 12.61%

  14.  
  15. #128

    Join Date
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    Default Re: Alternate LMBF methods

    Hey guys, been wanting to tell you this for a while now, just didn't have the heart. This post I made a minute ago elsewhere pretty much explains what I'm talking about:

    Hi JTH,

    How did you come up with the percentages? (I could cross check the numbers and answer my own question, but it's easier just to ask, and the odds favor that you used simple addition ) If you used simple addition, you will get faulty results:


    Suppose, an account has $100 first of the year, ends year up 10% for the year at $110, ends second year up 10% (for that year) at $121.

    Simple addition says total percentages over the two year span is 20% (10%+10%). But as you can see, it is actually 21% ($100 into $121).

    The differences/errors are amplified with higher account amounts (used internally by the tsptalk spreadsheet) and time (number of years span lasts).

    To do this correctly is more complicated and requires more work. (Using a pseudo account balance for each trader that runs to whole time span, etc.)


    They also do these simple addition of percentages in the alternative LMBF forums...also getting incorrect conclusions...guess I'll finally let them know as well by copying this to them.

    To any sensitive readers: not trying to fight (as so many times helpful (albeit: critical) information leads to on this site) just thought you would like accurate information. There is no easy way to tell someone: "Sorry, that's not correct if you did it like this..." But I tried.


    ​<end quote>
    [COLOR=#0000ff][FONT=comic sans ms][I]"In the land of idiots, the moron is King."--Unknown[/I][/FONT][/COLOR]

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  17. #129

    Default Re: Alternate LMBF methods

    Yes, Userque, you can't simply add up your returns to total them or average them because your balance is different for each one and leads to erroneous results. You aren't figuring your subsequent gains/losses from your previous gains/losses. The classic example is losing 50% one year and earning 50% the next does not get you back to where you were. That is why you need to compute stuff like annualized returns instead of simple means. That's explained here: An Introduction to measuring risk in the TSP Funds. Post #2 is probably what you want.

    If this is not what you are referring to, feel free to give another example. I'm no finance person and we don't want people led astray.
    Allocations as of COB Dec 28 : 100% S. | Retirement Date:Dec 2025
    Past Returns:
    2020 31.85%,2019 27.97%,2018 -3.36%,2017 13.10%, 2016 -1.79%, 5Yr Avg 12.61%

  18.  
  19. #130

    Default Re: Alternate LMBF methods

    Back-tested results for the LMBF0 indicator method

    Here are 26 years of back-tested returns for the zero-latency LMBF method, LMBF0. It sets the whole next month to last month's best fund. This is only an indicator method that uses the TSP Fund monthly return data. We can't actually trade LMBF0 since we always have a 1 day lag between determining the best fund and exercising an IFT into it, but this gives us more data to back-test against since TSP Fund daily data only goes back to June 2003. Another caveat is that the S & I Funds only go back to January 2001 so they aren't used in LMBF0 before then. Have a look; analysis to follow.

    Year G F C S I LMBF LMBF-1 LMBF0
    1988 8.81% 3.63% 11.84% 7.39%
    1989 8.81% 13.89% 31.03% 23.47%
    1990 8.90% 8.00% (3.15%) 0.57%
    1991 8.15% 15.75% 30.77% 11.80%
    1992 7.23% 7.20% 7.70% 0.72%
    1993 6.14% 9.52% 10.13% 3.56%
    1994 7.22% (2.96%) 1.33% 0.64%
    1995 7.03% 18.31% 37.41% 29.43%
    1996 6.76% 3.66% 22.85% 26.96%
    1997 6.77% 9.60% 33.17% 9.52%
    1998 5.74% 8.70% 28.44% 31.25%
    1999 5.99% (0.85%) 20.95% 9.70%
    2000 6.42% 11.67% (9.14%) (6.46%)
    2001 5.39% 8.61% (11.94%)
    (9.04%) (21.94%) 3.85%
    2002 5.00% 10.27% (22.05%) (18.14%) (15.98%) (1.65%)
    2003 4.11% 4.11% 28.54% 42.92% 37.94% 38.73%
    2004 4.30% 4.30% 10.82% 18.03% 20.00% 13.00% 14.50% 15.48%
    2005 4.49% 2.40% 4.96% 10.45% 13.63% 2.38% 5.68% 5.70%
    2006 4.93% 4.40% 15.79% 15.30% 26.32% 7.07% 17.85% 8.18%
    2007 4.87% 7.09% 5.54% 5.49% 11.43% 10.97% 10.51% 13.78%
    2008 3.75% 5.45% (36.99%)
    (38.32%) (42.43%) (11.06%) (10.15%) (11.39%)
    2009 2.97% 5.99% 26.68% 34.85% 30.04% 9.66% 18.05% 15.06%
    2010 2.81% 6.71% 15.06% 29.06% 7.94% 12.85% 17.35% 17.35%
    2011 2.45% 7.89% 2.11% (3.38%)
    (11.81%) 12.22% 8.69% 9.95%
    2012 1.47% 4.29% 16.07% 18.57% 18.62% 19.27% 23.60% 23.63%
    2013 1.89% (1.63%)
    32.45% 38.35% 22.13% 9.21% 12.26% 12.66%
    Allocations as of COB Dec 28 : 100% S. | Retirement Date:Dec 2025
    Past Returns:
    2020 31.85%,2019 27.97%,2018 -3.36%,2017 13.10%, 2016 -1.79%, 5Yr Avg 12.61%

  20.  
  21. #131

    Default Re: Alternate LMBF methods

    Analyzing LMBF0 (Part 1)

    Now that we have back-tested results for LMBF0 in the previous post, let's see how it compares to LMBF and LMBF-1.

    Looking at the 3 tables below, we see their 10, 5, and 3 year returns. The Annualized Return is computed using a CAGR (Compound Annual Growth Rate). The Standard Deviation is a measure of volatility or risk as outlined here: An Introduction to measuring risk in the TSP Funds

    10 Year (2004 - 13) G F C S I LMBF LMBF-1 LMBF0
    Annualized Return 3.39% 4.66% 7.44% 10.43% 7.08% 8.26% 11.46% 10.66%
    Standard Deviation 1.19% 2.61% 17.86% 20.99% 20.57% 7.74% 8.85% 8.86%

    5 Year (2009 - 13) G F C S I LMBF LMBF-1 LMBF0
    Annualized Return 2.32% 4.60% 18.00% 22.50% 12.39% 12.59% 15.88% 15.64%
    Standard Deviation 0.56% 3.35% 10.47% 15.01% 14.46% 3.60% 5.12% 4.65%

    3 Year (2011 - 13) G F C S I LMBF LMBF-1 LMBF0
    Annualized Return 1.94% 3.44% 16.22% 16.59% 8.51% 13.49% 14.68% 15.26%
    Standard Deviation 0.40% 3.92% 12.40% 17.04% 15.24% 4.22% 6.36% 5.91%
    From these 3 tables we see that both the annualized return and risk (standard deviation) for LMBF0 are within the same ballpark values as LMBF and LMBF-1. Most values are in fact between the two. This assures us that LMBF0 is a good indicator method for LMBF and LMBF-1. Also notice that all 3 methods show similar relationships to the TSP Funds. All 3 methods outperformed the C Fund over the last 10 years at half the risk while they underperformed the C Fund over the last 5 & 3 years but still incurred only half the risk.

    The 10 year produced better results for us than the 5 & 3 year because it includes the 2008 economic downturn while the 5 & 3 year do not. This would indicate that our methods tend to perform more by reducing losses than they do by increasing gains. 2013 confirmed this view on the positive side. If you bought-and-held C and/or S Funds during 2013 you would have done much better than our methods. It's not always like that. 2012 was also a good year, and our methods beat all 5 TSP funds. So which is it? Will these trends continue over time? How do the methods perform longer term? Let's find out in part 2 of this analysis.
    Allocations as of COB Dec 28 : 100% S. | Retirement Date:Dec 2025
    Past Returns:
    2020 31.85%,2019 27.97%,2018 -3.36%,2017 13.10%, 2016 -1.79%, 5Yr Avg 12.61%

  22.  
  23. #132

    Default Re: Alternate LMBF methods

    Analyzing LMBF0 (Part 2)

    The 2 tables below use LMBF0 to extend our back-testing to the last 13 & 14 years. I chose 13 years to include all the S & I Fund data available. I also chose 14 years to include year 2000 so we would include all of the dot-com bust. Let's see how we fared.

    13 Year (2001 - 13) G F C S I LMBF0
    Annualized Return 3.72% 5.34% 4.66% 8.45% 4.59% 11.04%
    Standard Deviation 1.23% 2.89% 19.42% 22.72% 22.57% 11.64%

    14 Year (2000 - 13) G F C LMBF0
    Annualized Return 3.91% 5.78% 3.61% 9.69%
    Standard Deviation 1.37% 3.22% 19.16% 12.14%
    Here we now see the results of 2 economic downturns. The risk for LMBF0 has gone up but it is still half of that of the S Fund and slightly more than half of the C Fund. More importantly it is producing greater returns than either C or S. Including the 2nd economic downturn shows us how well LMBF0 works at stemming losses. It is what is giving us superior results. Still don't believe me? Check out the F & C Funds. That's right, F is the winner. F doesn't produce the great annual returns we see in C but it also doesn't have those massive losses. In the end you would have been better off buy-and-holding F all those years instead of C. We saw the same thing last year for the years 2004 - 2012. Gains are great, but losses are deadly. Remember that the next time LMBF0 has a dog of a year like it did in 1992.

    Speaking of 1992, let's go all the way back to 1988 and see what we get over 26 years.

    26 Year (1988 - 13) G F C LMBF0
    Annualized Return 5.46% 6.66% 10.30% 10.92%
    Standard Deviation 2.10% 4.87% 17.93% 11.80%
    Not bad, I'd like 10 - 11% a year over all that time. Looks like you get it from both LMBF0 and the C Fund, but LMBF0 does it with a lot less risk. That's what comes from following a trend.

    Finally, let's cut out those 2 economic downturns and look at the data around the dot-com boom.

    12 Year (1988 - 99) G F C LMBF0
    Annualized Return 7.29% 7.70% 18.66% 12.37%
    Standard Deviation 1.08% 6.08% 12.88% 11.22%

    10 Year (1990 - 99) G F C LMBF0
    Annualized Return 6.99% 7.51% 18.18% 11.83%
    Standard Deviation 0.92% 6.23% 13.40% 11.69%
    Wow, now that was the time to buy-and-hold the C Fund. LMBF0 had no advantage over the C Fund during this boom time. It produced inferior returns and gave no real advantage in containing risk. I think this shows that our initial premise was correct. The LMBF family of methods works primarily to reduce losses, not magnify gains. There are years where it wins over all the TSP Funds (1996, 1998, 2007, 2011, 2012), but its primary strength is in stemming losses in down years.

    So, if you are certain we are going to have another decade like the 90s, from here, you will want to buy-and-hold equities. On the other hand, if you are concerned we are going to have a correction/downturn/crash in the next year or two or five you may want to look into something, like this, that lessens your losses if/when that happens.
    Allocations as of COB Dec 28 : 100% S. | Retirement Date:Dec 2025
    Past Returns:
    2020 31.85%,2019 27.97%,2018 -3.36%,2017 13.10%, 2016 -1.79%, 5Yr Avg 12.61%

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Alternate LMBF methods
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Alternate LMBF methods
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