Count your blessings that I'm not much of a swing trader.
OK,
I think I figured this out.
I am an investor. I have $10,000 invested in TSP all in the S Fund on July 1, 2011.
I have $10,000/23.1295= 432.3483 shares of S Fund
On July 8th, I feel a change in direction and sell my S Shares and buy G shares (at 11:30 EST).
Sell = 432.3483*$23.4219= $10126.42
Buy = $10126.42/13.6889=739.7541 G Shares
Now, my account reflects the EXACT trade amount, but there were trade charges incurred. Where are these transactions recorded? How are they charged to the TSP?
The answer is that my trade cost $4.00, but I'm not charged that directly. It is dispersed across the funds.
Why this is confusing, is that as individual investors, we would expect it to reflect in our accounts, but it doesn't. It is administratively handled and passed out across the membership.
Now let's say because I traded $10,000 the trading cost was $10.00. This would represent a .1% of the account value.
Now enter in Birchtree (hypothetically)! He executes the same trade, but his account has $2,000,000. Because of the value, his trade cost is higher, let's say $1,000. or .0005%.
Now, Birchtree is laughing all the way to the bank because his account barely got touched (percentage-wise). But I'm like WTF? My trade should have only cost a nickel.
But that's not what happens. The costs are transferred across the member base and it devalues EVERYONE'S account. That's the nature of this beast.
But, you can read here LINK and see how they explain reconciling accounts at one price on one day and taking a loss at opening day prices the next.
So, to be "fair" they decided that since this was a group investment tool, the costs would be shared by the group. This 401g plan was never designed to have the fleixbility of the single investor. The only way we could get that freedom, is if they offered a "privatized" solution. That means, instead of depositing our 401g money into TSP, it would go into a commercial 401k account. I might be able to swallow that, then I get the freedom I want minus the FRTIB headache! But I would have to give up on a low management fee.
Make sense? I need to validate my thinking!
THIS IS WHERE I WOULD PUT SOMETHING TO REPRESENT MY THINKING, BUT THEN THEY SHOW UP!
Tracker = Check my position
Count your blessings that I'm not much of a swing trader.
I would love to see this in writing also.
I do not have time this weekend, but I will review Title 5 as soon as I can to see if it mentions a 2 IFT limit. Any changes have to be put in the Federal Registar for review, but I do not know what affect Congress has on Title 5.
Frixxxx has the inside track on trading costs but the operating costs have gone up every year.
There were all kinds of excuses given why the FRTIB was forcing us to 2 IFT's. The biggest reason, in my opinion, was Barclay's. If a few of you remember there was that big swing in and out of the I fund over a couple of days and Barclay's almost didn't have enough money to cover the move. That was the beginning of the end of the daily IFT.
May the force be with us.
Frixxxx, your explanation assumes each account is traded and incurs fees individually, similar to a private brokerage account like we own it or something, but that can't be the case because if we individually owned our shares, including the 'G' ones, then Turbo Timmy would have to come ask each of us if he could please borrow it to help keep the wheels greased until August 2nd, and that didn't happen.
So I'm guessing the entire holdings of each fund are actually owned and traded by TSP in big blocks and we are simply shareholders in the operation entitled to a portion of the aggregate holdings commensurate with our contributions and earnings, similar to a co-op.
That makes the whole trading game so easy a caveman with a little spreadsheet experience could do it. Every investor gets a row in the table, with columns corresponding to each fund. The number of shares of each fund is listed and earmarked for you. The number of shares doesn't change unless you trade that particular day (or make a contribution). At the end of the day you simply sum each column and record the net number of shares needed or excess for each fund.
Then you make one big trade on the market per day for each fund, either a buy or a sell depending on if aggregate number of shares increased or decreased, and divy it up internally to the TSP co-op share holders. With that kind of volume we should be getting a pretty good deal on the transaction fees, with plenty of change left over to pay the computer monkeys and a few self-absorbed administrators to baby sit our nest eggs. Too easy.
Even if it doesn't (or couldn't) work that way, I'm not buying that the individual number of IFT's have anything to do with admin costs for everybody, otherwise we've been hanging the wrong scapegoat.
Example, say TSP has 1,000,000 participants, with trading strategies as follows:
500,000 active traders x 4 transactions each (two IFT's and two payroll contributions per month) = 2,000,000 trades
400,000 buy-n-holders x 2 transactions each (two payroll contributions per month) = 800,000 trades
100,000 Lifecycle fund investors x 30 trades each (rebalance everyday to maintain allocation) = 3,000,000 trades
Observations:
In any given month more than 50% of the transactions are made on behalf of people who aren't really trading, just sitting on their thumbs in an autopilot fund. Do you wonder if that is a cash cow for Blackrock, like a way to skim fees or something?
The folks that prefer to trade more often than two almost certainly wouldn't be trading every single day. And it wouldn't matter anyway since each and every TSP fund - all ten of them - must rebalance every day thanks to the Lifecycle funds. So why limit the number of trips the active traders can take when the bus is going that direction anyway and collectively we've already paid for the fuel thanks to the L20something maroons? If anything, the additional number of transactions from the actives should add volume and lower cost per trade for everybody.
That don't make no sense.
100g
SUBCHAPTER VII—FEDERAL RETIREMENT THRIFT INVESTMENT MANAGEMENT SYSTEM
Here is the link http://www.law.cornell.edu/uscode/ht...84_40_VII.html
SUBCHAPTER III—THRIFT SAVINGS PLAN
Forgot this one http://www.law.cornell.edu/uscode/ht...84_40_III.html
Last edited by nasa1974; 07-15-2011 at 06:56 PM. Reason: added some more information
May the force be with us.
The link I provided explained it that way...I'm not saying it's fact or right...just saying....
What I think is weird (example) is that when they close the "I Fund" on one trading day it closes at $23.00 If a million shares traded out that day the pay the accounts $23.00/share. But when the shares are actually traded the next day at market open, let's say $22.50 there is a cost incurred to the fund because they didn't sell what they paid the accounts. $.50*1,000,000=$500,000 shortfall. And of course it worked in reverse.
It is stated by the TSP board that the costs were in the I Fund, not the other ones....so why the sweeping across the board limit?
It makes some sense but it is not the total picture!
THIS IS WHERE I WOULD PUT SOMETHING TO REPRESENT MY THINKING, BUT THEN THEY SHOW UP!
Tracker = Check my position
I took the time and quickly looked through; TITLE 5 > PART III > Subpart G > CHAPTER 84
CHAPTER 84—FEDERAL EMPLOYEES’ RETIREMENT SYSTEM
I found nothing that made any reference to our limit of 2 IFT's a month. However, Title 5 of the US Code as currently published by the US Government reflects the laws passed by Congress as of Jan. 7, 2011.
Last edited by nasa1974; 07-15-2011 at 07:55 PM.
May the force be with us.
http://www.myfederalretirement.com/public/253.cfm
Wait, wait, wait. The TSP funds are just index funds right? And they just trade the market? And trading the market makes it dificult for TSP managers to replicate the performance of the market? So we gotta quit trading so much because it makes their jobs harder? Boy, would I like to have that job description.it became clear that a small number of TSP participants were pursuing ``market timing'
active investment strategies in the TSP. These activities were diluting
the earnings of the long-term investors, and adversely affecting the
ability of TSP managers to replicate the performance of selected
indexes as required by law.
Before I go and say something stupid like 'leave it up to the gubmint to screw up an index fund'... maybe I should ask what are the admin/operating fees for TSP compared to private index funds?
At a online brokerage I pay 0.08 in annual fund operating expenses for a S&P equivalent, and can get in and out as often as I want, and I supposedly actually own the shares.
Oh my, I think I just got it...
The key words in the TSP board's statement is "replicate the performance of selected indexes". Notice they don't say own the shares of, rather replicate the performance of. So when we invest in TSP we're just buying paper? That supposedly copies other paper? Like a derivative? And they charge us how much for the priveledge?
I don't understand why anyone would plug more in that scheme than required to get the 5% free money. Classic double-or-nothing proposition, put in x and get out either 2x or 0, yeehaw! I call tails!
I better put a little more thought into my retirement plans, got to get back to work.
100g
Thanks burro. Read the link. Interestingly, less than 4 years later their reasoning doesn't hold up. Just off the top of my head the basis points against each fund is up and operating cost have at least tripled. So where is the savings?
May the force be with us.
Maybe because the board was tired from being so busy trying to replicate the market they just read it wrong, and when they got to the 'savings' part they just saw the 'sa' and glossed over the rest thinking it must say 'salary', naturally followed by 'increase' because they've been working so hard to replicate the market and all.
Are they fed employees with publicly available compensation like the rest of us?
Wonder how much those guys get paid. For hanging paper. My paper.
100g
I like TSPTalk and I think most people here are well-intentioned but if I followed their advice, I'd be hunkered down in my basement with a thousand cans of tuna fish.
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