TSP Questions/Answers on Funds, Charting, etc.: Part 1

This week's article will begin a short series to answer some good questions from "JAC," a relatively new TSPTalk board member.  This week we'll address the following part of JAC's inquiry: 

"Which chartable, trackable indices best match TSP funds and why? You can dig around in the forum and find this out, but an authoritative FAQ-style statement would be helpful. Effects of compounding? Where do you go to get the historical info? Which charting sites are best?"

All of the TSP funds except the G Fund are closely mirrored by other indices, exchange-traded funds (ETFs) and mutual funds.  I may run some actual correlations for a future article, but for this article I'll mention a few that are certainly close enough for government/TSP work.  

If your main interest is charting, you'll want to use an index or ETF.  The reason is they're based on intraday data, so for each day they have an open, high, low and closing price.  You must have all four of these daily prices to perform either bar or candlestick chart analysis.   Mutual funds, on the other hand, only have a single (closing) price each day, so you're limited to line charts.  The link below has some basic information on the different chart types in case you're not familiar with them.

http://www.fxtrek.com/universityEN/charts.asp 

As for the best charting programs, my favorite free one is www.stockcharts.com.  Other popular programs include www.bigcharts.com and www.barchart.com. 

If your primary interest is in longer-term analysis or modeling, the main concern is simply having enough data.  For most purposes, a single daily price is sufficient, so mutual funds can work for this.  Some indices can also fit the bill if there's ample historical data.  Most ETFs are relatively new, however, so they aren't your best bet.  

To get free historical data, I suggest using Yahoo Finance and downloading it into a spreadsheet.  Here are the steps: 

      1)      Go to http://finance.yahoo.com/
2)      Put the symbol to download in “Get Quotes”
3)      Select “Historical Prices”
4)      Type in your desired “Start” and “End” dates
5)      Select “Get Prices”
6)      Scroll down and select “Download to Spreadsheet”

This will be a comma separated value (CSV) file.  If you're not sure how to open this in Excel, let me know and I'll cover it next week. 

In addition to its nice charts, Stockcharts.com has a great education section with explanations and formulas for many popular indicators.  It even has downloadable Excel files for some of them.  If you build a spreadsheet with historical data and want to experiment with moving averages, Stochastics, the Commodity Channel Index (CCI), and the like, this is a great resource: 

http://stockcharts.com/education/IndicatorAnalysis/index.html 

OK, now that the technical details are out of the way, let's get back to the really important question: what are the best substitutes for the TSP funds?  Here's my take:

F Fund
Charting:  iShares Lehman Aggregate Bond (AGG)
Historical Analyses/Modelling:  Fidelity Investment Grade Bond (FBNDX)  (data starting in 1989 at Yahoo Finance)

C Fund
Charting:  S&P Index (^SPX at Yahoo, $SPX at Stockcharts.com)
Historical Analyses/Modelling:  Ditto.  The S&P Index (^SPX at Yahoo) with data beginning at Yahoo Finance in 1950

S Fund
Charting:  Wilshire 4500 Completion Index ($EMW at Stockcharts.com)
Historical Analyses/Modelling:  Vanguard Extended Market Index (VEXMX) (data starting in 1991 at Yahoo Finance)

I Fund
Charting:  iShares MSCI EAFE Index (EFA at Yahoo and Stockcharts.com)
Historical Analyses/Modelling:  Vanguard Total International Stock Index (VGTSX)  (data starting in 1996 at Yahoo Finance)

As I mentioned, the G Fund really doesn't have a index or fund that's a close match.  The type of investment that best approximates it is probably a stable value fund.  These are offered in some IRAs, 401(k)s and annuities.  However, no two stable value funds perform the same, so there's no way of knowing which is currently the G's best match.  Actually, come to think of it, the closest substitute is probably commercial paper (90-day  AA Financial or AA Asset Backed).  As of today's date, both of these are within 0.1% of the G Fund's rate.  The following site has current commercial paper rates:

http://www.federalreserve.gov/releases/cp/

Regarding the effects of compounding in your TSP (or any other account), I'd recommend the following article:

http://mutualfunds.about.com/cs/mutualfunds101/a/compounding.htm

Well, that should be enough to keep you busy until next time, especially if you're a fellow techno-finance geek.  So until then, invest and trade well!

John, AKA “SystemTrader”