TSP Talk Blog

Stocks were mixed on the first trading day in July, and the first day of the third quarter. The bulls took over after a flattish open, but there was some selling late in the day to take the indices off their highs. The Dow lost 78-points while the broader indices posted modest gains. Small caps lagged with the Russell 2000 losing about 1% on the day, but our S-fund clung to a small gain, thanks to midcaps having a decent day.

Daily TSP Funds Return More returns

With Friday being the observed holiday day for Independence Day, we will get the June jobs report today (Thursday July 2.) Estimates are looking for a gain of 3.3 to 3.5 million jobs, and an unemployment rate of 13%. With numbers like that we are very vulnerable to big surprises on one side or the other.

We'll also get the new initial jobless claims for the week so we get a double dose of employment data today, so it could be a market mover on a normally quiet pre-holiday trading day.

Today is going to be a quickie as far as analysis goes. I spent most of Wednesday knee deep in code, programming the changes to the L Funds into our AutoTracker, and I have a lot more work to do so there could be some delays in posting the updated returns and standings for Wednesday's close. I have to admit that I was blindsided by these changes. The TSP probably announced this well in advance, but I must have spaced it off, and boom, they started yesterday.

The L2020 fund was moved into the L-Income Fund, and inexplicably, the TSP added a bunch more L-funds with minor differences between each of the L funds. I am going to use today's commentary to send a message to those of you who use these L funds...

STOP THE INSANITY!

The L-funds are fine but they are NOT designed to be timed, nor diversified. There are now 10 different L-funds, and basically these are 10 different ways to spread out your money within the G, F, C, S, and I funds based on your age or retirement date, etc.

I see some folks spreading their account across several of these different L-funds, and changing them occasionally. It doesn't make a whole lot of sense to do that. To put 10% in each L-fund, for example just makes your account allocation more confusing, and not much more than that. If you did something like that, I'd bet you probably wouldn't be able tell me how much of your account is in stocks or bonds.

If you look at the allocation of each L-fund, splitting your allocation among them does next to nothing for you. My advice for those who use the L-funds --

Either pick one (there are 10 choices now), and stick with it for a while. Then, as you get older you can use a more defensive L fund.

Or #2, use the G, F, C, S, and I funds to give yourself your precise desired allocation, which is a much better way to go. Splitting L-funds is way over thinking things in my opinion, and probably does not give you the desired outcome that you are trying to get.

OK, rant over.


The AutoTracker could be down most of Wednesday evening so we can work on the L-fund changes. Please try again on Thursday or email us () with your exact change (COB date and new allocation.) Sorry for the inconvenience.

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As for the market, there was fairly solid action yesterday with some pockets of weakness. The S&P 500 (C-fund) chart attempted a breakout above the descending resistance line, but that looks like a bullish flag forming so the bulls may continue to have an advantage. There's often pre-holiday reversals but Independence Day has such a positive seasonal record because many traders take off early and leave the market for the investors to do their thing. But the jobs data coming out could also throw the market for a loop so as usual, there's no guarantees.




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Thanks for reading. Have a great Independence Day weekend!



Tom Crowley


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