Potential Strategy to Increase Trading "Options"

[ChemEng]

Since the announcement of the board trying to limit the number of trades we get, I have been trying to determine what strategies we have available to us to minimize the damage. Mostly it was spinning my wheels in the mud as a fool's errand. But I did find out something interesting that may have some implications for your TSP balances.

The idea is simple. TSP.gov gives you options with your money once it is in your account. But they can't do anything with getting money into the account. For that a different service is used. The service for the Army (where I work) is EBIS. Im assuming that other Agencies have a similar, if not the same, capability.

EBIS is the web portal that lets you view all your federal benefits in one place and make changes when able. So if you want to see you life insurance benefits, you can do it here. If you want to see you health insurance plan, you can also do it there. But the real key is that if you want to see what your contribution is to the TSP or make contribution changes, you can also do it there.

So how do you take advantage of this opportunity? It presents several different challenges--primarily that the change becomes effective on the next pay period instead of the next business day. That means typical day-to-day strategies aren't going to work anymore. But it leaves the door wide open for other 'longer' term strategies.

With that in mind, I am working on a new tool that looks to leverage this opportunity. Again the idea is simple--in Bearish markets, you want to hold off investing as long as possible. So what the tool does in these conditions is calculate a minimum amount to invest at the start of the year and then slowly increase it until you reach the amount you want to invest for the year.

It works in reverse for Bullish markets. It starts with a larger initial value and then slowly drops it throughout the remainder of the years pay periods until you reach the amount you want to invest for the year.

So while you cant use day to day trades to catch the daily differences, you can use this capability to buy more shares to take advantage of macro market conditions.

Has anyone else considered this? Is there value in pursuing it further? Thoughts? Comments? Anyone make it this far?

[Scottydog]

I wanted to respond to this last night was having some posting problems. I use EBIS as well - Navy here. It's true that your idea won't be able to take advantages of daily fluctuations but it is a good strategy though for market trends. What I mean by this is if the market is going down or going up....you can adjust your TSP Contribution allocation amts to put money into the weaker of the funds to "buy lower" versus the ones have have been performing well. Unless one of the funds is doing real well - it may not be worth it to execute this strategy alone. In where you adjust your contributions based on what is not participating in rallies or if something is getting beat up. I'll add one more piece to this strategy that I learned about in Jim Cramer's new book - which should make the strategy better. Now I'm not a true follower of his but I do like to listen to what he has to say. In his book he talks about contributions to your 401(k) - our TSP...and says that if there is a market decline - to bump up your contribution amounts while the decline is occuring. There is no need to worry about a bottom in this game - you'll never get it - especially when your adjustments to your contributions are done per pay period. In that time the market could drop 600 points and make it back up before your contributions are changed. Cramer says that if the market is down like 5%-10%...bump up your next months (equivalent) contributions and put them in asap....if a 20% or more...then adjust your contributions to be more than the next quarter or more...depending on when it's happening.

NOTE OF CAUTION: by doing this early in the year...you have to be careful on your total amount...that it doesn't exceed your limit for the year....otherwise you won't be getting the match if you have to stop your contributions early. Great example would be this Jan. The market started going south in Dec....fed into Jan this year. If you would have bumped up your %'s or $ amt into the TSP...you would have been buying the C, S, and especially the I at discount prices. Now that would have been only 2 pay periods but it better than nothing and you would have gotten prices that were quite a bit lower than what they are now.

I up my TSP Contribution %'s every year when we get a raise by the general increase....and take home the locality %. That way I'm paying my TSP more (2%+) while still having my paycheck increase some. So if we are in a bearish market right now.....and everyone seems to suspect that we'll be growing at a pretty good pace after June....then front load your TSP contributions but leave enough out that you don't hit the limit for the year (if you put that much in). I encourage everyone if they can to increase their contribution %'s every year just before the cola increases..etc. it's a way of "paying yourself" 1st while still maintaining the amt on your paycheck. Good Luck.