Market Timing Change

[peddler12]

Hello everyone I want to bounce my change today off of you. I did not sell any existing investments in my TSP. They are safely in the L2025 Fund and doing well. I did direct future contributions to the G Fund in hopes of buying during a possible dip some time in the coming year. My thinking is that I have about maybe a 50/50% chance of being successful. Would anyone like to add a any thoughts to my new contribution allocation move? One thought I had was that the S&P at 3,824 could go to 4,000 and then dip to 3824. Depends on time and the number of purchases I would have made during the rise then fall.

[megabad]

I don't understand. The L fund already automatically "buys on the dip". That is the beauty of L funds. The allocation stays roughly the same (given a constant age). So if the equity market plummets, it would sell fixed income and buy equities and vice versa. I mean, you have defined what this is pretty well--an attempt at market timing. On average, over the long run, your strategy here is a losing one for most. But there is always a chance you could be one of the few that hits the jackpot.

[dogagility]

For us none public employees, it would help us contribute if the alphabet soup was defined.

[livesoft]

I personally do not get out of equities when the government is about to splash another trillion dollars or so into the economy.

However, I love to do market timing, but one in the opposite way that you have done it. If there was a big drop in equities, then I would immediately see it without having to predict it. That is, it would be right in front of everyone's eyes and this bogleheads.org would light up with all kinds of posts from "I'm staying the course!" to "I moved everything to cash!" or "It's time to EVALUATE your jitters!" with a smattering of "I'm buying equities now." When you see such posts, then it is probably time to do some market timing, but not right now.

That written, we need posters like you and marge_g, frankjuca, Miujo, and TheBiggestLoser in order to keep things in balance.

[peddler12]

I don't understand. The L fund already automatically "buys on the dip". That is the beauty of L funds. The allocation stays roughly the same (given a constant age). So if the equity market plummets, it would sell fixed income and buy equities and vice versa. I mean, you have defined what this is pretty well--an attempt at market timing. On average, over the long run, your strategy here is a losing one for most. But there is always a chance you could be one of the few that hits the jackpot.

Thank you megabad! Your explanation of how my L Fund works is something that I never considered. I will have to think on this. No harm done. I haven't made any moves. My first contribution to the G Fund hasn't been made yet. I do greatly appreciate your excellent response.

[peddler12]

I personally do not get out of equities when the government is about to splash another trillion dollars or so into the economy.

However, I love to do market timing, but one in the opposite way that you have done it. If there was a big drop in equities, then I would immediately see it without having to predict it. That is, it would be right in front of everyone's eyes and this bogleheads.org would light up with all kinds of posts from "I'm staying the course!" to "I moved everything to cash!" or "It's time to EVALUATE your jitters!" with a smattering of "I'm buying equities now." When you see such posts, then it is probably time to do some market timing, but not right now.

That written, we need posters like you and marge_g, frankjuca, Miujo, and TheBiggestLoser in order to keep things in balance.

Thank you livesoft. Excellent advice.

[02nz]

For us none public employees, it would help us contribute if the alphabet soup was defined.

These are common enough terms for the TSP that it's probably not necessary to spell out. They are defined here:

https://www.bogleheads.org/wiki/Thrift_Savings_Plan

[KneePartsPro]

I agree with livesoft. Why take any action now? Just rebalance during the "dip".

[placeholder]

What will you do if in a year there hasn't been a dip and the markets are higher than ever?

[MindBogler]

I personally do not get out of equities when the government is about to splash another trillion dollars or so into the economy.

Sage advice right here.

[pahkcah]

For us none public employees, it would help us contribute if the alphabet soup was defined.

Here you go:

The Government Securities Investment (G) Fund: The TSP G Fund’s investment objective is to produce a rate of return that is higher than inflation while avoiding exposure to credit (or default) risk and market price fluctuations. It invests exclusively in nonmarketable short-term U.S. Treasury securities that are specially issued to the TSP. The earnings consist entirely of interest income on these special securities.

The Fixed Income Index Investment (F) Fund: The F Fund’s investment objective is to match the performance of the Barclays Capital U.S. Aggregate Bond Index, a broad index representing the U.S. bond market. Its assets are held in a separate account and managed to track the Barclays Capital U.S. Aggregate Bond Index.

The Common Stock Index Investment (C) Fund: The C Fund’s investment objective is to match the performance of the Standard and Poor’s 500 (S&P 500) Index

The Small Capitalization Stock Index (S) Fund: The S Fund’s investment objective is to match the performance of the Dow Jones U.S. Completion Total Stock Market Index, a broad market index made up of stocks of U.S. companies not included in the S&P 500 Index.

International Stock Index Investment (I) Fund: The I Fund’s investment objective is to match the performance of the Morgan Stanley Capital International EAFE (Europe, Australasia, Far East) Index.

The TSP L Funds – “Lifecycle” Funds: Use professionally determined investment mixes that are tailored to meet investment objectives based on various time horizons. The objective is to strike an optimal balance between the expected risk and return associated with each fund. The L Funds’ strategy is to invest in an appropriate mix of the G, F, C, S, and I Funds for a particular time horizon, or target retirement date.

Among the Lifecycle Funds is one simply called the "L" fund. It is intended for participants who are currently withdrawing their TSP accounts in monthly payments or who plan to begin withdrawing before 2020. The other Lifecycle funds are for years 2025 through 2065 in 5-year increments.

As an example, the L 2025 Fund currently has the following composition:

G Fund 46.13%
F Fund 6.18%
C Fund 24.59%
S Fund 6.41%
I Fund 16.69%

Sorry for the lengthly response, but hope this provides a basic explanation.

[peddler12]

What will you do if in a year there hasn't been a dip and the markets are higher than ever?

placeholder that thought has crossed my mind. Back to the position that my plan would have a 50% chance of failing. Thank you.