Seasonal Musings

[Aitrus]

I’ve decided to put together this lengthy thread because it seems like there’s a dearth of information for active movers and market timers here at TSP Center. However, there’s not much information readily available on more passive seasonal strategies since Jahbulon went quiet a while ago when he started his TSP Holy Grail Research Lab and tspmarketwatch.com sites (both of which are no longer up and running, BTW). While I admit to reading, and following, much of his research (and some of it is replicated here), I’ve also incorporated other things I’ve learned from other sources as well.

Please be aware that this thread isn’t an effort to prove that “Seasonal Beats All”, or that it’s impossible to beat the market using timing or that buy-and-hold is for lazy folks. It’s simply an effort to give more options to TSP investors. I’ve seen more than a few new (or newish) members asking about the seasonal calculator or other seasonal topics lately, and I’ve been asked a question or two in private, so I figured that since I’ve done a lot of studying on this method of investing as it relates specifically to the TSP, I’d share what I know. In the end, we all have the same goal – to make money, right? The data and trends I discuss here are convincing enough to me that I’m following a seasonal strategy with my personal and Fantasy TSP accounts. I’m putting my money where my mouth is.

I’ll caveat all of this by saying that I’m not a fiduciary, I’m not an advisor, I’m not an expert, and I’m not responsible for your monetary decisions. This thread is partly to inform, partly to document my own thoughts and musings, and partly to invite discussion on the topic of seasonal investing within the framework of TSP. You’re all adults here (at least by law if not by mental faculty), and you each hit the “submit” button on the Interfund Transfer screen on tsp.gov of your own accord. That said, let's get this show on the road, shall we?

Seasonal investing is a strategy that looks at historical monthly patterns in the market, analyzes the times of year that have good odds of having positive returns, and then playing those odds and letting the Law of Averages win out over the long term. This method of trading is a good option for those that don’t want to “set it and forget it” because they feel that they need to be aware of what’s happening with their money, but don’t have the time to devote to learning how to time the market or sitting in front of candlesticks for 2-3 hours a day. It’s also an option for the followers that like John Bogle’s take on investing (buy and hold philosophy), that the best strategy is to stay in for the long haul and weather the storms, but don’t completely agree with his rationale when it comes to staying in the market when the odds are that it will be a negative month.

Think of it this way: an MIT study on casino gambling found that the best possible odds for games where you play against the house (instead of other players) is Craps. The mathematical calculations show that the best odds (meaning, risk vs payout) you can get are just shy of 50/50 if you bet the Pass Line and take the Maximum Odds option whenever you have a chance. Any other game in the casino is worse for you from there. Knowing that, if your goal is to have the best odds possible at the casino, why go anywhere else but the Craps table?

Seasonal investing is the same way. We’re taking a look at the historical returns, calculating the averages for each fund for each month, and picking the best fund to be in for that month based on the odds. It’s not “Sell in May and go away”, but it certainly follows the concept that there are certain times when it’s better to be in than out, and vice versa. We’re betting on the odds. Market Timers do the same thing, just using different data and on a shorter timeframe to figure out their odds. “Buy and Hold” followers do the same thing in that they rely on the long-term market average to continue being the average for the next 30 years or so simply because it’s been that way for the past 200+ years. We’re all betting the odds, we’re just using different sets of data to determine our odds.

Note: All the average figures I quote will use the Cumulative Annual Return Rate (CAGR). This number is different from a straight mathematical average and takes into effect negative compounding. Imagine you have $1,000 and have a 100% gain. This gives you a total of $2,000. Then you have a -50% loss, which takes you back to $1,000. The straight average would be a 25% gain, but the real number is 0% because it takes into account the compounding factor. CAGR is the 0% figure, and it’s always lower than a straight average if there’s any negative numbers in the formula, so it makes sense for us to use it so we don't overestimate the actual returns. TSP uses CAGR when figuring the multi-year average on your return for the 10-year fund returns on tsp.gov.

An example of how seasonal strategies work is like this: since 1988 the S fund has been positive in December 23 out of 26 times, or 88% of the time. Over that time, it has a CAGR of 3.4%. In the last 20 years it has been positive 17 times (85%), with a CAGR of 3.22%. And in the last 10 years has been positive 8 times, with a CAGR of 2.81%. The last 5 years has been positive 4 of 5 times, and the CAGR has been 3.87%. Of those 3 negative Decembers since 1988, the returns were -4.32% (2002), -0.4% (2007) and -0.04% (2012). An investor using these historical figures would conclude that there’s a darn good chance of December being a positive month for the S Fund, but if it ends up being a negative month then it’s likely to be minor, so his risk of being in the market during December is small for the gains he's likely to get. December is a good bet.

The seasonal strategy takes this line of thinking and applies it to the rest of the year, allocating a “best fund” to each month based on historical odds. Then the strategy is re-analyzed each month to decide if a particular month’s fund needs to be changed, or if it should stay the same for next year. If the investor desires it, additional study can be devoted to learning “why” each month tends to be positive or negative for particular sectors of the market. December, for example, is affected by fund managers needing to pad their annual numbers, end of year dividends and pay bonuses being rolled over into further purchasing to avoid tax burdens, the Holiday shopping season and by general optimism.

It’s not a 100% accurate method, but then again no strategy is. Personally, I’m satisfied with an 80% success rate – if the strategy works 80% of the time to give me a CAGR of 12% or more per year, then I’m winning in the long run. Why 12%? Because the S&P 500 (C Fund) has a historical 1988 – 2013 CAGR of 9.9% while the Wilshire 4500 (S Fund) has a CAGR of 11.86% for the same time period. If I can beat those benchmarks, then I will be winning over Buy and Hold.

Seasonal investing can have elements of both buy-and-hold methodology and technical chart analysis in it. It’s like buy-and-hold in that you follow a system and largely ignore the media, blogs, and world politics when making your investing decisions. It’s like technical analysis in that you can use technicals to decide when the best time is to make your move if you’re not satisfied with just moving funds at the end of the month. Using technicals can give you +/- a few % each year due to moving at the most optimal time +/- a few days. I won't cover technicals in this thread, that's something that's amply covered by other folks on the Forum.

Like any system, though, seasonal systems have Pros and Cons.

Pros:
- Emotion is removed from the decision making process. Everything is analyzed logically by establishing quantified limitations of what a “good” month looks like, what the odds are of having a positive month vs the likelihood of a month being negative.
- It’s a systematic approach that analyzes the data and makes adjustments as necessary. You don’t blindly follow the system, you understand “why” you’re in a certain fund at a certain time and have factual data to support that understanding.
- It tends to produce consistent returns.
- Simple: only 6 moves a year.

Cons:
- If you commit to the strategy, you must follow through with it and ride the emotion that comes with rough times. I made the mistake of not doing so in Feb 2014 – the market took a short dive in late Jan while I was in the S fund. I got scared and ran to the F fund for the duration of Feb because the F fund is the second-best fund for that month. While that Feb ’14 was a positive for the F fund (0.62%), the S fund had a return of 5.43%. This mistake on my part has made a big difference in my ’14 real-world return so far. I’ve learned my lesson: follow the data, trust the numbers. The Law of Averages works.
- No system works all of the time. Sometimes it just won’t work. We’re playing the odds with this strategy and while the Law of Averages says we should win in the long run, it also says that we’ll also have periods when we don’t. What we’re doing is stacking the deck in our favor and making an informed decision on where and when we invest. It’s the long-term end result you need to keep your focus on, not the short term dips and peaks. Followers of Bogle’s philosophy can appreciate this sentiment.
- Times when the markets move sideways for a long time are frustrating to this system because we’re looking for clear positives and negatives during certain times. At such times, we have to resist the urge to try to play Market Timer and try to do better. You avoid doing this by remembering that a small positive is still a positive, and a small negative could be much worse if we aren’t good at our market timing decisions.

So what does it take to follow a system like this?
- An interest in paying attention to what your account is doing while acknowledging that we don’t know enough to play Market Timer well enough to produce reliable returns.
- Dedication to follow a logical system without letting emotion get in the way.
- A long-term focus: 12% a year over 30 years turns a biweekly $200 allocation into around $1,500,000. This would represent a FERS employee that makes $52,000 a year allocating 5% and gets the 5% match for 30 years, and doesn’t get a pay raise the entire time.
- A willingness to ignore how well or poorly everybody else is doing, what the media is saying, whether or not the “experts” are saying to buy or sell, etc. Let the numbers do the talking for us and aim to get the average as positive as we can. The major exception to this is paying attention to the policies set out by the Federal Reserve – they will absolutely impact the F Fund, and to a smaller extent the G Fund.

You might be thinking “That’s all fine and dandy, but what data is out there to support a seasonal system?” Answer: tons of it. Books have been written on seasonal trends in general. http://www.tsp.gov has historical data going back to 1988 for the G, F and C funds, and it’s easy to find similar data for the S fund (which TSP has back to 2001). I’ve taken the time to make an Excel workbook that details all of the monthly returns for each fund going back to 1988 (I fund goes back to Jan 2001) and calculated the CAGRs as well as the annual Positive / Negative Rate (PNR) for each fund for each month. Most months are pretty black and white as to whether or not it’s a good time to be in the market according to the odds. Then I track various seasonal mixes using that data.

What I’d like to do with this thread is invite discussion on this strategy, and to document the monthly progress of several seasonal TSP fund mixes that I’ve seen, including the one I’m using. Going forward I’ll also do a monthly entry that documents how each fund has performed in the past for the next upcoming month, and this entry will be towards the end of the month so interested parties will have enough time to percolate on what the upcoming month looks like historically. I’ll also post how the various mixes are set for the upcoming month.

And with that, I’ll end this lengthy post and use the next few posts to do an overview of the various fund’s historical details and the seasonal mixes I’m tracking. They are as follows:

- TSP Center’s default setting on the “TSP Seasonal Calculator” page.
- Jahbulon’s Basic Seasonal formula
- Boltman’s Seasonal Formula
- A straight “Sell in May and Go Away” using G and C

There’s other mixes I’m tracking, but none are doing well. I can give those stats as well if anybody is interested and asks nicely. Also, if anybody has another version they’d like me to add to the list and my ongoing tracking database, let me know and we’ll see if it’s a promising mix. None of the mixes I follow use the L funds, and I don’t anticipate starting them anytime soon. The L funds don’t fit into the methodology and mindset that seasonality uses.

Stay tuned for the individual Fund History posts.

[Aitrus]

The G Fund as of 25 Jun 14

It goes without saying that the G Fund is no longer in its heyday. Back in 1988 it earned a return of 0.76% in Aug and Sep. That year it earned 8.83%. Its low point was Sep ’12, when it earned 0.1% for the month and a whopping 1.48% for the year. May ’14 had a return of 0.2%. The steep price paid in the G Fund’s low recent returns is offset by the guaranteed safe haven it gives us. Remember, a weak positive is still a positive and better than a loss.

Note: For CAGR explanation, see 1st post in the thread. PNR is the ratio of Positive Months vs Negative Months. A fund that was positive in March for 5 out of 10 years would have a PNR of 50%.

Here’s the historical breakdown according to various timeframes:

Since 1988:
Overall CAGR: 5.48%
Best monthly average: July at 0.47%
Worst monthly average: Feb at 0.4%
Last month with a positive of .5% or more monthly return: Oct ‘00

Last 20 years:
Overall CAGR: 4.72%
Best monthly: July at 0.41%
Worst monthly: Feb at 0.34%

Last 10 years:
Overall CAGR: 3.4%
Best monthly: July at 0.31%
Worst monthly: Feb at 0.24%

Last 5 years:
Overall CAGR: 2.33%
Best monthly: July at 0.21%
Worst monthly: Nov at 0.17%

[Aitrus]

F Fund as of 25 Jun 14

This fund has its ups and downs, and has a least favorite time of year (March). Its positives outweigh its negatives, however, and in the long run has better returns than the G Fund. But the recent actions by the Federal Reserve make the future of the F Fund uncertain at best. When the Fed eventually raises rates again, the F Fund will likely go down because bond rates are inverse to bond returns. The higher the rates, the lower the returns on currently held bonds.

Note: For CAGR explanation, see 1st post in the thread. PNR is the ratio of Positive Months vs Negative Months. A fund that was positive in March for 5 out of 10 years would have a PNR of 50%.

Since 1988:
Overall CAGR: 6.4%
Pos/Neg Ratio (PNR): 23 of 26, or 88.46% years are positive
Lowest years: -2.97% (1994), -0.86% (1999) and -1.68% (2013)

Historical Monthly Profile since 1988: Consider a “good” F Fund month to be a CAGR of 0.5% or better, and a PNR of 70% or better.

Jan: CAGR 0.59%, PNR of 77.8% (21 of 27), lowest return was -1.38% (1990), highest return was 1.98% (1995)
Feb: CAGR of 0.35%, PNR of 74.1% (20 of 27), low was -1.74% (1999), best was 2.38% (1995)
Mar: CAGR of -0.08%, PNR of 44.4% (12 of 27), low was -2.45% (1994), best was 1.38% (2009)
Apr: CAGR of 0.45%, PNR of 59.3% (16 of 27), low was -2.54% (2004), best was 2.05% (1989)
May: CAGR of 0.64%, PNR of 66.6% (18 of 27), low was -1.78% (2013), best was 3.84% (1995)
Jun: CAGR of 0.68%, PNR of 69.2% (18 of 26), low was -1.53% (2013), best was 3.19% (1989)
Jul: CAGR of 0.80%, PNR of 73.1% (19 of 26), low was -2.51% (2003), best was 2.69% (1997)
Aug: CAGR of 0.70%, PNR of 73.1% (19 of 26), low was -1.48% (1989), best was 2.12% (1991)
Sep: CAGR of 0.83%, PNR of 88.5% (23 of 26), low was -1.47% (1994), best was 2.68% (2003)
Oct: CAGR of 0.5%, PNR of 73.1% (19 of 26), low was -2.4% (2009), best was 2.45% (1989)
Nov: CAGR of 0.49%, PNR of 63.4% (17 of 26), low was 1.37% (2001), best was 3.3% (2008)
Dec: CAGR of 0.62%, PNR of 69.2% (18 of 26), low was -1.55%, best was 3.73% (2008)

Last 20 years:
Overall CAGR: 5.79%
PNR: 85% (17 of 20)
Good months:
Jan: CAGR 0.65%, PNR 85%, low was -0.86% (2009), high was 1.98% (1995)
Apr: CAGR 0.5%, PNR 70%, low was -2.54% (2004), high was 1.89% (2002)
Jul: CAGR 0.71%, PNR 70%, low was -2.51% (2003), high was 2.69% (1997)
Aug: CAGR 0.80%, PNR 75%, low was -0.86% (1997), high was 1.88% (2004)
Sep: CAGR 0.74%, PNR 85%, low was -1.31% (2008), high was 2.68% (2003)
Worst month: March – CAGR 0%, PNR 55%

Last 10 years:
Overall CAGR: 4.65%
PNR: 90%
Good months:
Jan: CAGR 0.51%, PNR 80%, low was -0.85% (2009), high was 1.76% (2008)
Apr: CAGR 0.74%, PNR 80%, low was -0.19% (2006), high was 1.35% (2005)
Jul: CAGR 0.8%, PNR 70%, low was -1.32% (2006), high was 1.59% (2009 and 2011)
Aug: CAGR 1.02%, PNR 90%, low was -0.48% (2013), high was 1.88% (2004)
Nov: CAGR 0.63% average, PNR 70%, low was -0.86% (2004), high was 3.3% (2008)
Worst month: March – CAGR -0.05%, PNR 50%

Last 5 years:
Overall CAGR: 4.59%
Best Months:
Jan: CAGR 0.71%, PNR 80%
Apr: CAGR 1.08%, PNR 100%
Jul: CAGR 1.15%, PNR 100%
Aug: CAGR 0.67%, PNR 80%
Sep: CAGR 0.62%, PNR 100%
Worst month: Dec - CAGR -0.46%, PNR 20%

[Aitrus]

C Fund as of 25 Jun 14

This fund represents the S&P 500 index, which are the 500 largest stocks in the American market. It has clearly favored times of year, and not so favored times of year.

Note: For CAGR explanation, see 1st post in the thread. PNR is the ratio of Positive Months vs Negative Months. A fund that was positive in March for 5 out of 10 years would have a PNR of 50%.

Since 1988:
Overall CAGR: 9.9%
PNR: 81% (21 of 26)
Lowest years: -37% (2008), -22.04% (2002), -11.95% (2001), -9.14% (2000), and -3.14% (1990)
Best year: 37.39% (1995)

Monthly profile since 1988: Consider a “good” C Fund month to be an average return of 1% or greater and a PNR or 70% or better.

Jan: CAGR 0.41%, PNR 59.3% PNR (16 of 27), low was -8.41% (2009), best was 7.14% (1989)
Feb: CAGR 0.3%, PNR 63% (17 of 27), low was -10.64% (2009), best was 7.2% (1998)
Mar: CAGR 1.41%, PNR 70.4% (19 of 27), low was -6.33% (2001), best was 9.74% (2000)
Apr: CAGR 1.83%, PNR 74% (20 of 27), low was -6.06% (2002), best was 9.58% (2009)
May: CAGR 1.31%, PNR 70.4% (19 of 27), low was -7.99% (2010), best was 9.44% (1990)
Jun: CAGR -0.3%, PNR 53.8% (14 of 26), low was -8.41% (2008), best was 5.54% (1999)
Jul: CAGR 1.07%, PNR 50% (13 of 26), low was -7.7% (2002), best was 8.83% (1989)
Aug: CAGR -0.83%, PNR 57.7% (15 of 26), low was -14.47% (1998), best was 6.19% (2000)
Sep: CAGR -0.15%, PNR 53.8% (14 of 26), low was -10.87% (2002), best was 8.92% (2010)
Oct: CAGR 1.36%, PNR 65.4% (17 of 26), low was -16.83% (2008), best was 10.93% (2011)
Nov: CAGR 1.48%, PNR 69.2% (18 of 26), low was -7.87% (2000), best was 7.62% (2001)
Dec: CAGR 2.05%, PNR 88.5% (23 of 26), low was -5.85% (2002), best was 11.41% (1991)

Last 20 years:
Overall CAGR: 9.2%
PNR: 80% (16 of 20)
Good Months:
Mar: CAGR 1.85%, PNR 75%
Apr: CAGR 2.22%, PNR 75%
Nov: CAGR 1.66%, PNR 75%
Dec: CAGR 1.66%, PNR 85%
Worst Months:
Feb: CAGR -0.1%, PNR 60%
Jun: CAGR -0.24%, PNR 60%
Aug: CAGR -0.78%, PNR 60%
Sep CAGR -0.07%, PNR 60%

Last 10 years:
Overall CAGR: 7.44%
PNR: 90%
Good months:
Mar: CAGR 2.26%, PNR 80%
Apr: CAGR 2.45%, PNR 80%
Jul: CAGR 1.55%, PNR 70%
Dec: CAGR 1.82%, PNR 90%
Worst Months:
Jan: CAGR -0.86%, PNR 50%
May: CAGR -0.06%, PNR 60%
Jun: CAGR -1.25%, PNR 50%
Aug: CAGR -0.26%, PNR 60%

Last 5 years:
Overall CAGR: 18%
PNR: 100%
Good Months:
Feb: CAGR 3.36%, PNR 100%
Mar: CAGR 2.77%, PNR 100%
Apr: CAGR 1.31%, PNR 80%
Jul: CAGR 3.75%, PNR 80%
Sep: CAGR 2.13%, PNR 80%
Nov: CAGR 1.86%, PNR 80%
Dec: CAGR 2.6%, PNR 100%
Worst Months:
May: CAGR -2.18%, PNR 40%
Jun: CAGR -0.82%, PNR 40%
Aug: CAGR -1.46%, PNR 40%

[Aitrus]

S Fund as of 25 Jun 14

This tracks the Wilshire 4500 index (Small and Mid Cap stocks), which are all the other stocks not covered by the S&P 500. Between the C and S funds, you have all 5,000 stocks in the market covered. TSP has information for the S fund going back to 2001. I went to the Wilshire website to find the information that goes back to 1988 for my purposes.

Note: For CAGR explanation, see 1st post in the thread. PNR is the ratio of Positive Months vs Negative Months. A fund that was positive in March for 5 out of 10 years would have a PNR of 50%.

Since 1988:
Overall CAGR: 11.86%
PNR: 73% (19 of 26)
Lowest years: -38.32 (2008), -18.14% (2002), -15.78% (2000), -9.03% (2001), -6.45% (1990), -3.4% (2012), -2.66% (1994)
Best years: 43.47% (1991), 42.91% (2003), 42.39% (1999), 38.36% (2013)

Monthly profile since 1988: Consider a “good” S Fund month to be an average return of 1% or greater and a PNR or 70% or better.

Jan: CAGR 0.95%, PNR 63% (17 of 27), low was -8.53% (1990), best was 7.59% (2012)
Feb: CAGR 1.05%, PNR 59% (16 of 27), low was -12.15% (2001), best was 15.55% (2000)
Mar: CAGR 1.22%, PNR 70% (19 of 27), low was -9.18% (2001), best was 8.64% (2009)
Apr: CAGR 1.63%, PNR 70% (19 of 27), low was -12.03% (2000), best was 15% (2009)
May: CAGR 1.14%, PNR 63% (17 of 27), low was -7.38% (2000), best was 9.95% (1997)
Jun: CAGR 0.2%, PNR 58% (15 of 26), low was -7.63% (2008), best was 12.01% (2000)
Jul: CAGR 0.16%, PNR 46% (12 of 26), low was -9.93% (2002), best was 8.66% (2009)
Aug: CAGR -0.14%, PNR 62% (16 of 26), low was -19.38% (1998), best was 11.16% (2000)
Sep: CAGR 0.2%, PNR 65% (17 of 26), low was -12.5% (2001), best was 11.47% (2010)
Oct: CAGR 0.2%, PNR 58% (15 of 26), low was -20.99% (2009), best was 14.09% (2011)
Nov: CAGR 1.16%, PNR 69% (18 of 26), low was -17.03% (2000), best was 8.44% (1999)
Dec: CAGR 3.4%, PNR 88% (23 of 26), low was -4.32% (2002), best was 13.78% (1999)

Last 20 years:
Overall CAGR: 10.35%
PNR: 80%
Good Months:
Mar: CAGR 1.38%, PNR 70%
Apr: CAGR 1.94%, PNR 70%
Nov: CAGR 1.24%, PNR 75%
Dec: CAGR 3.22%, PNR 85%
Worst Month: Jul – CAGR -0.29%, PNR 40%

Last 10 years:
Overall CAGR: 10.44%
PNR: 80%
Good months:
Mar: CAGR 2.55%, PNR 70%
Apr: PNR 2.35%, PNR 70%
Sep: CAGR 1.11%, PNR 80%
Dec: CAGR 2.81%, PNR 80%
Worst Months:
Jun: CAGR -0.96%, PNR 50%
Aug: CAGR -0.51%, PNR 50%
Oct: CAGR -0.29%, PNR 60%

Last 5 years:
Overall CAGR: 22.5%
PNR: 80%
Best Months:
All but May, Jun and Aug. Lowest “Best Month” was Apr – CAGR 1.01%, PNR 60%
Worst Months:
May: CAGR -2.38%, PNR 40%
Jun: CAGR 1.31%, PNR 40%
Aug: CAGR -1.93%, PNR 40%

[Aitrus]

I Fund – 25 Jun 14

This fund’s information goes back to only 2001. Only used in one seasonal formulation that I’m tracking: Boltman’s Mix. I tend to shy away from this fund because of its uncertainty due to Europe’s ongoing Euro fiasco. Foreign markets seems to me to be subject more to failure and govt. takeover than America’s. Consider Argentina’s collapse in 1998 – 2002 or the EU’s confiscation of 10% of assets in Cyprus banks in 2013, for example.

Note: For CAGR explanation, see 1st post in the thread. PNR is the ratio of Positive Months vs Negative Months. A fund that was positive in March for 5 out of 10 years would have a PNR of 50%.

Since 2001
Overall CAGR: 4.6%
PNR: 69%
Best years: 37.92% (2003), 30.04% (2009), 22.13% (2013)
Worst years: -42.43% (2008), -21.94% (2001), -15.96% (2002)

Monthly profile: Consider a “good” S Fund month to be an average return of 1% or greater and a PNR or 70% or better.

Jan: CAGR -1.58%, PNR 43% (6 of 14), low was -11.93% (2009), best was 6.14% (2006)
Feb: CAGR -0.13%, PNR 57% (8 of 14), low was -10.23% (2009), best was 5.58% (2014)
Mar: CAGR 0.87%, PNR 64% (9 of 14), low was -6.67% (2001), best was 7.2% (2009)
Apr: CAGR 3.28%, PNR 71% (10 of 14), low was -2.35% (2010), best was 12.13% (2009)
May: CAGR -0.95%, PNR 50% (7 of 14), low was -11.4% (2012), best was 13.41% (2009)
Jun: CAGR -0.72%, PNR 46% (6 of 13), low was -8.15% (2008), best was 7.08% (2012)
Jul: CAGR 0.6%, PNR 54% (7 of 13), low was -9.99% (2002), best was 10.78% (2010)
Aug: CAGR -0.37%, PNR 46% (6 of 13), low was 9.03% (2011), best was 4.87% (2009)
Sep: CAGR -0.69%, PNR 69% (9 of 13), low was -12.31% (2008), best was 9.81% (2010)
Oct: CAGR 1.08%, PNR 22% (10 of 13), low was -20.59% (2008), best was 9.48% (2011)
Nov: CAGR 0.73%, PNR 69% (9 of 13), low was -6.72% (2008), best was 6.16% (2004)
Dec: CAGR 2.67%, PNR 77% (10 of 13), low was -3.27% (2002), best was 8.12% (2010)

Last 10 years:
Overall CAGR: 7.08%
PNR: 80%
Best Months:
Mar: CAGR 1.48%, PNR 70%
Apr: CAGR 3.17%, PNR 70%
Dec: CAGR 3%, PNR 80%
Worst Months:
Jan: CAGR -1.36%, PNR 50%
May: CAGR -1.64%, PNR 20%
Jun: CAGR -0.36%, PNR 50%
Aug: CAGR -0.4%, PNR 50%
Nov: CAGR -0.07%, PNR 60%

Last 5 years:
Overall CAGR: 12.4%
PNR 80%
Best months:
Feb: CAGR 2.59%, PNR 80%
Jul: CAGR 4.84%, PNR 80%
Sep: CAGR 2.43%, PNR 80%
Oct: CAGR 2.91%, PNR 80%
Dec: CAGR 2.56%, PNR 80%

[Aitrus]

TSPCenter.com’s Seasonal Mix – as of 25 Jun 14

This is the mix that appears when you go to TSP Center’s Seasonal Calculator page. The mix is as follows:

Jan: F Fund
Feb: G Fund
Mar: C Fund
Apr: C Fund
May: C Fund
Jun: F Fund
Jul: F Fund
Aug: F Fund
Sep: F Fund
Oct: F Fund
Nov: C Fund
Dec: S Fund

Since 1988
Overall CAGR: 14.72%
Last 20 CAGR: 14.07%
Last 10 CAGR: 11.11%
Last 5 CAGR: 15.73%

Overall PNR: 96% (25 of 26)
Best Year: 48.13% (2009)
Worst Year: -2.06% (1994)
2008 Result: 1.82%
So far for 2014: 5.83%

Analysis: This fund mixture has solid performance. It has only one negative year in 1994, and the 2008 crash resulted in a 1.82% gain. The following year, 2009, was the banner year with 48.13%. This is a decent one to follow, but there are better mixes out there.

[Aitrus]

Jahbulon’s Basic Seasonal Mix as of 25 Jun 14

This is originally found at viewtopic.php?f=14&t=5474

This mix is what forum member Jahbulon came up with back in 2012. I followed his research and findings when he was running the Holy Grail Research Lab and then later on when he started up http://www.tspmarketwatch.com. Sadly, both sites are no longer running, and Jahby seems to have disappeared without a trace, but I’ve continued to track this mix’s performance. Jahby later then modified this mix slightly in 2013 by adding a 9-month SMA stop loss trigger and again in 2014 with secondary fund “choices” for each month. Although I personally use the 9-month SMA trigger, I won’t be tracking those two modifications – too much variation for the spreadsheets I have running. This mix is the one I follow with my own accounts, and it’s been kept in its original unmodified version.

In the beginning when I first started putting together my Excel sheets (about 6 months ago), I started seeing the patterns emerge. After I had all the data plugged in I made a homebrew mix based solely off what I saw on the Excel sheets with a goal of using the most optimal funds for each month. When I checked my formula against Jahby’s, I found that they were exactly the same mix. That confirmed that data for me – if Jahby and I both came up with the same mix, and I did mine completely independent of his, then that tells me that he was on to something significant in 2012.

Jan: S Fund
Feb: S Fund
Mar: C Fund
Apr: C Fund
May: C Fund
Jun: F Fund
Jul: C Fund
Aug: F Fund
Sep: F Fund
Oct: C Fund
Nov: C Fund
Dec: S Fund

Since 1988
Overall CAGR: 17.15%
Last 20 CAGR: 15.37%
Last 10 CAGR: 12.38%
Last 5 CAGR: 23.13%

Overall PNR: 92% (24 of 26)
Best years: 44.3% (1991) and 42.99% (1998)
Negative years: -22.52% (2008), -2.2%(2002)
So far for 2014: 7.55%

Analysis: This mixture might have taken a big hit in 2008, but it more than made up for that with double digit returns every year since then: 27.08%, 24.66%, 19%, 11.27%, and 34.94% for 2009 – 2013 respectively. In addition, this mixture has had only 5 years that were not double digit years since 1988 (including both negative years). I view this mix as very solid, and one of the better ones you can follow.

[Aitrus]

Boltman’s Mix

This is originally found at viewtopic.php?f=14&t=6885.

This mix is the only one I’m tracking that uses the I fund, and so goes back to only 2001.

Jan: F Fund
Feb: F Fund
Mar: S Fund
Apr: S Fund
May: S Fund
Jun: F Fund
Jul: I Fund
Aug: F Fund
Sep: F Fund
Oct: C Fund
Nov: S Fund
Dec: I Fund

Since 2001
Overall CAGR: 16.07%
Last 10 CAGR: 13.6%
Last 5 CAGR: 23.63%

Overall PNR: 85% (11 of 13)
Best years: 50.68% (2003), 49.4% (2009), 40.01% (2010)
Negative years: -15.4% (2008), -0.26% (2012)
So far for 2014: 0.5%

Analysis: This mix has had some great years and only 3 years that weren’t double digit returns (including both negative years). The downside is that there’s only 13 years of history to this one. And it uses the I fund, which can be a plus or a minus, depending on how you feel about that investment option. In the end, I feel that this one has good returns, and if you want to incorporate the I fund, then this one is worth looking at.

Sell in May and Go Away – G and C Mix

This mix follows the old adage “Sell in May and Go Away”, meaning that you get out of the market at the end of April, then buy back in on 1 Oct. I have different variations of the Sell in May theme going, and this one is the best representation of buying in to the S&P 500, then getting out to cash at those times.

Jan: C Fund
Feb: C Fund
Mar: C Fund
Apr: C Fund
May: G Fund
Jun: G Fund
Jul: G Fund
Aug: G Fund
Sep: G Fund
Oct: C Fund
Nov: C Fund
Dec: C Fund

Since 1988
Overall CAGR: 11.65%
Last 20 CAGR: 11.32%
Last 10 CAGR: 8.12%
Last 5 CAGR: 16.9%

Overall PNR: 88% (23 of 26)
Best years: 43.03% (1998), 28.82% (1991), 28.45% (1999)
Negative years: -24.63% (2008), -6.14% (2000), -0.21% (2005)
So far for 2014: 2.8%

Analysis: This mix shows us what happens when we blindly follow a specific system and aren’t open to making small adjustments when the data tells us to do so. What is interesting, however, is that there were 3 years in this mix that had all positive months. These were 1998, (CAGR 43.03%), 2006 (CAGR 15.13%), and 2013 (25.63%). There were also a few more years that had only one or two negative months. However, double digit years are less numerous than in other mixtures. One upside? Only two moves a year.

[Aitrus]

For July 2014

For this coming July, the individual funds have performed on average as follows:

G Fund
Since 1988: 0.47%
Last 20 years: 0.41%
Last 10 years: 0.31%
Last 5 years: 0.21%

F Fund – A “good” month is a CAGR of 0.5% or better, and a PNR of 70% or better.
Since 1988: CAGR 0.8%, PNR 73%
Last 20 years: CAGR 0.71%, PNR 70%
Last 10 years: CAGR 0.8%, PNR 70%
Last 5 years: CAGR 1.15%, PNR 100%
July is usually a strong month for the F Fund.

C Fund – A “good” month is a CAGR of 1% or better, and a PNR of 70% or better.
Since 1988: CAGR 1.07%, PNR 50%
Last 20 years: CAGR 0.58%, PNR 50%
Last 10 years: CAGR 1.55%, PNR 70%
Last 5 years: CAGR 3.75%, PNR 80%
July is up and down historically for the C Fund, but in the last decade has been very positive. This is due to a Summer Rally in the market that sometimes happens in July, and it’s been happening more in the last few years than in the late ‘90s and early ‘00s.

S Fund – A “good” month is a CAGR of 1% or better, and a PNR of 70% or better.
Since 1988: CAGR 0.16%, PNR 46%
Last 20 years: CAGR -0.29%, PNR 20%
Last 10 years: CAGR 0.94%, PNR 40%
Last 5 years: CAGR 3.65%, PNR 60%
July is historically a weak month for the S fund, but the last 5 years has seen a bucking of this trend a little. It’s too early yet for the data to be conclusive.

I Fund - A “good” month is a CAGR of 1% or better, and a PNR of 70% or better.
Since 2001: CAGR 0.6%, PNR 54%
Last 10 years: CAGR 1.7&%, PNR 60%
Last 5 years: CAGR 4.84%, PNR 80%
As with the S Fund, the I fund is historically weak at this time of year, but recent years have started to shift that pattern.

Individual Seasonal Mix Allocations
This is what the various seasonal mix allocations are going to for July.

TSPCenter.com’s Seasonal Mix: Remain in F Fund
Jahby’s Seasonal Mix: Move from F Fund to C Fund
Boltman’s Mix: Move from F Fund to I Fund
Sell in May and Go Away: Remain in G Fund

Note: For CAGR explanation, see 1st post in the thread. PNR is the ratio of Positive Months vs Negative Months. A fund that was positive in March for 5 out of 10 years would have a PNR of 50%.

[crondanet5]

Can you elaborate on your 9-month SMA Black Swan Trigger?

BTW I wanted to give you 150 reputation points but apparently I recently gave you rep points and have to spread my blessings to some other people before I can give you more. (Actuallly kind of a nice protection feature, otherwise you and I could have a thousand reputation points by simply bestowing them upon each other). I am hoping many readers of this post will award you reputation points for one of the best posts I've seen on this site.

[Buckeyedog]

Yeah, this is great stuff! Thanks so much. And i have no idea what reputation points are or how they work!!!

[Aitrus]

Thanks for the praise, Cron. I've spent a lot of time getting all the data together and making sure I have my details right. I don't want to steer anybody wrong on this.

Jahby's Seasonal Mix 9-month SMA stop loss trigger (or 200 day Moving Average - they're the same thing): it comes into play in two ways.

The first is if you're in a fund and the price crosses down through 9-month SMA, then it's time to exit. For example, in the AGG chart (F fund), the 9-month SMA is around 106.8 If the F fund were to sink like a rock and pass this line, then we exit the fund until the end of the month. Then we take a fresh look because it's time to decide where we sit for the next month.

That's where the second part comes into play. If it's time to move, and the price is below the 9-month SMA by 1% or more, then we go to, or remain in, the G fund. The price has to overtake the SMA by 1% before we move back in, which can be either sometime during the month or at the end of month changeover, buyer's choice.

So the scenario would play out like this:
Suppose we're currently in the F Fund. The Fed makes a stupid move and jacks rates to ridiculous levels which causes bonds to tank. The F-fund SMA is broken, so we go to G. Change of month, time to go to C. We look at C, and find that the price is above the 9-month SMA by at least 1%, so it's safe to go in. Next month, it's time to go to F. We look, and F is still below the SMA by at least 1%, so we go to G.

In essence, we're always looking at the SMA since that's our stop loss point, but right now it's so far below all the current prices that I didn't mention it in the monthly update for July. But I'll fix that and start including the 9-month SMAs starting with August.

Current 9-month SMA levels as of 25 Jun 14:

AGG (F Fund): SMA at 106.8, current price is near 109
$SPX (C Fund): SMA at 1822.18, current price is near 1960
$EMW (S Fund): SMA at 978.71, current price is near 1040
EFA (I Fund): SMA at 64.63, current price is near 68.25

I realize that it would take a big drop to hit the SMAs at this point, but remember that this is a passive strategy - we're going to ignore the small and medium drops and not worry until big ones hit. Then the SMA trigger comes in to play to limit our losses. Let's consider what happened in August of 2011 when America's AAA credit rating was dropped to AA+ by Standard and Poor's.

Early in the month the S&P 500 dropped from a high of around 1350 through the 9-month SMA (which was then at around 1280) within a couple of days. Then it kept going until it hit bottom at the low-1100 range. Then it stayed below the SMA until early Jan 2012. Aug - Dec 2011 was rife with huge whipsaws. Monthly returns for the C fund for those months were:
Aug -5.44%
Sep -7.03
Oct 10.93%
Nov -0.21%
Dec 1.04%
This means a cumulative return for Aug - Dec 11 of -1.67%. The total market return for C fund for the year: 2.12% Total for S fund: -3.4%

Jahby's seasonal rotation using the 9-month SMA would have played out like this:
Aug F Fund (1.45%)
Sep F Fund (0.73%)
Oct G Fund (0.14%)
Nov G Fund (0.14%)
Dec G Fund (0.15%).
This would have been a return of 2.61% during a very uncertain time while saving us from a huge market drop.

The actual returns if we'd stayed with the program without the 9-month SMA would have been as follows:
Aug F Fund (1.45%)
Sep F Fund (0.73%)
Oct C Fund (10.93%)
Nov C Fund (-0.21%)
Dec S Fund (-0.04%)
This would have been a total progression of 12.86%.

Following the SMA rule would have taken our 2011 return from 19% to 8.75%. True, we would have missed October's huge gains, but the program also protected us from the C and S Fund drops of that fall. Remember, our goal with this program is to limit our risk and beat Buy and Hold. The program would have done that, and in spades, in 2011.

[John316]

Fabulous article and well deserving of all the accolades. I appreciate the technicals while still keeping it in English for us to understand. Kudos to you.

Now, can you help me find my car keys?

[Aitrus]

Sure, John. Check the couch cushions, the dog's poop, the kid's sandbox, and the wife's purse. They're usually in the last place you look.