Seasonal Musings 2017

[Timber82]

Thank you for the warm welcome. I was posting on FB earlier about making a move based on TSPcenters Seasonal strategy and I came to learn that there are numerous seasonal strategies here in this thread. I haven't had a chance to read this or last years but you did mention a few peoples strategies I will be interested to read about them. I put in my move to C fund today in line with the main seasonal strategy on this website. Hated seeing everyone making all these nice gains while I was sitting in G but at least I didn't lose money.

[edgepush]

Thanks Aitrus. Transferred 50% into C fund and set 100% contribution allocation yesterday. I plan to compare this vs L 2050 over the course this year.

Good questions edgepush.

1 - No, I don't change my strategy. Let me give you an example of what happened the last time I thought that having a "backup Mix" was a good idea. I thought that we were having a big sell-off in late Jan / early Feb '14. $DWCPF (which the S Fund is based on) went from a high on 22 Jan of 1016.08 to a low of 950.35 on 3 Feb. That's a drop of 65.73 points, or 6.47% over 8 trading days. The first 3 days were half of the drop all by themselves, then the market floated / dead cat bounced / bear flagged, and then 3 Feb kicked in rest of the drop in one day. I got out on 27 Jan, when the market closed at 971.90 and stayed in F for all of Feb. I missed a huge run-up that cost me not only all I had lost, but another 1% or so on top of that.

There's a reason I won't change the policy of sticking with the program: you never know what will happen in the long run for the rest of the year. Jahbulon's Basic Mix has lost to the C Fund 11 times. The only time the C Fund had a bad year and the Mix didn't beat it was 1994, when the C Fund had a return of 1.33%, and the Mix had -0.32%. The only other year that had negative returns was 2008, when the Mix had -15.88% and the C Fund had -37%. Almost every year after 2008 the Mix has had double digit returns (2012 is the only single digit year). The worst the Mix has performed against the C Fund was 1997, when the Mix had 20.41% and the C Fund had 33.17%. Some years that the C Fund had negative numbers the Mix actually had really good numbers: 1990 - 21.9% (Mix) vs -3.14% (C Fund); 2000 - 2002 - 20.22%, 6.58%, 0.6% (Mix) vs -9.14%, -11.95%, -22.04% (C Fund). The best the Mix ever did against the C Fund was

I guess what I'm trying to say is that when the market is in a recession or has a selloff that's the time when I absolutely want to stick with the program. Time and again it has proven to outperform the market during downturns. And that's one of the prime reasons to use the strategy in the first place - to limit exposure to the market during those downturns. Which is better: to wear a bulletproof vest to protect yourself from being shot at? Or to not get shot at in the first place by not being in the area of town during the time of day that gunfights happen most often?

2 - I look at long-term returns. Every sector of the market has had boom periods, and the I Fund is certainly due. That said, look at the long term results. The I Fund has a CAGR of 4.75% since 1988, and 3.96% over the last 20 years. Compare that to the S Fund, which has a CAGR of 11.32% since 1988, and 9.12% over the last 20. Which blind squirrel found more nuts? Yes, the I Fund is due to score big, but we can't foretell when that will happen. In the meantime other sectors of the market are more reliable and will make us money whether the I Fund is up or down.

But that's looking at just the sectors of the market across the entire year. What about the Mixes? Using the I Fund at specific times that have good potential returns makes sense. That's why gclapper's M3 Mix does so well - it uses the best month of the year for the I Fund (April), and it outperforms the C Fund in July. Other than that Jahbulon's and gclapper's are identical. The difference is that gclapper performs about 1-2% better in the long run CAGRs, a total of 26.33% total returns better since 1988. I just can't bring myself to use it because I don't trust foreign markets - and that's my hangup. Don't let me stand in your way if using it makes sense to you.

[Aitrus]

That's a good idea, edgepush. Nothing wrong with watching a strategy for a while to see how it works before trusting it fully. That's partly what the Fantasy account is for.

[Aitrus]

Seasonal Strategy Results for February 2017

Note: A "good" month for the F Fund is CAGR 0.5% or better, and PNR 70% or better. A "good" month for C, S and I Funds is CAGR 1% or better, and PNR 70% or better. See 2nd post in the thread for description of CAGR. PNR is the ratio of Positive Months to Negative Months.

General Funds
G Fund: 0.18%, 0.38% Year to Date (YTD), PNR remains 100%
Feb Total CAGR = 0.38%
Feb 20 year CAGR = 0.29%
Feb 10 year CAGR = 0.18%
Feb 5 year CAGR = 0.15%

February is normally the worst month of the year for the G Fund, however, this year was actually pretty respectable compared to the results of the past 6 years. 2016’s Feb return was 0.15%.

F Fund: 0.71%, 0.94% YTD
Feb Total CAGR = 0.32%, PNR 73%
Feb 20 year CAGR = 0.35%, PNR 75%
Feb 10 year CAGR = 0.21%, PNR 80%
Feb 5 year CAGR = 0.32%, PNR 80%

February isn’t known for having incredibly high returns, although the chances of having a positive return are pretty good. This year, it had a good return, which also happens to be the highest one since 2007. 2016’s return was 0.68%.

C Fund: 3.97%, 5.95% YTD
Feb Total CAGR = 0.58%, PNR 63%
Feb 20 year CAGR = 0.09%, PNR 55%
Feb 10 year CAGR = 1.13%, PNR 70%
Feb 5 year CAGR = 3.09%, PNR 80%

This February was a pretty good one that was above average for the C Fund. Hopefully the trend will continue through the spring, which is seasonally one of the strongest times of year for large stocks. 2016’s return was -0.12%.

S Fund: 2.45%, 4.66% YTD
Feb Total CAGR = 1.24%, PNR 63%
Feb 20 year CAGR = 0.8%, PNR 60%
Feb 10 year CAGR = 1.54%, PNR 80%
Feb 5 year CAGR = 3.06%, PNR 100%

February is close to meeting the “good month” standard for the S Fund, and this year fell in line with that expectation. 2016’s return was 0.5%.

I Fund: 1.44%, 4.37% YTD
Feb Total CAGR = 0.6%, PNR 60%
Feb 20 year CAGR = 0.44%, PNR 60%
Feb 10 year CAGR = 0.57%, PNR 60%
Feb 5 year CAGR = 1.78%, PNR 60%

February is a pretty “meh” month for the I Fund historically speaking. This year was above average, and continues the potential for a good year started with a nice January return. 2016’s return was -2.82%

Currently Tracked Seasonal Strategies
TSPCenter.com's Default Setting: G Fund in Feb (0.18%), 0.41% YTD
Jahbulon's Basic Mix: S Fund in Feb (2.45%), 2.69% YTD (This is the one I follow with my personal TSP account)
gclapper’s M3 Mix: S Fund in Feb (2.45%), 2.69% YTD
tjm100’s Mix: C Fund in Feb (3.97%), 4.21% YTD
Boltman's Mix: F Fund in Feb (0.71%), 0.94% YTD
Sell in May and Go Away: C Fund in Feb (3.97%), 5.95% YTD
G all year, S in Dec Mix: G Fund in Feb (0.18%), 0.38% YTD

Everybody had gains for February, some more than others. Sell in May is currently leading, with tmj100’s Mix not too far behind. There’s still lots of year left, and we have the Spring earning season in front of us. Spring is when a lot of profits are usually made in the C and S Funds. Let’s hope that the Law of Averages stays on our side this year.

[Mad Maxx]

Aitrus, I think you might have read the wrong line from your spreadsheet. Jahbulon mix should read 4.66% (vice 2.69%). As always, love what you do man.

[Aitrus]

No, it's right. You're forgetting that I changed Jahbulon's Mix to use the F Fund in Feb instead of S. Jahbulon's Old Mix uses S in Jan, and so has 4.66% at the end of Feb. The F Fund had a lower Jan 2017 return than the S Fund did, so the 2.69% is correct.

Last year it would have been a different story altogether. The old version had a return of -8.26% by the end of Feb, 9.39% for the year. The current version had a return of 2.0% at the end of Feb, 21.63% for the year.

[Mad Maxx]

Ah yes. I didn't change my sheets, but rather kept the old mix. My bad.

[Jupiter31]

Good morning everyone - Just finished reading this article (see link) about the rates/bond/yields, etc.. and thought to myself, "with the volatility in the bond market here (Fed raising rates) and elsewhere (negative interest rates), will that affect seasonal strategies that employ the "F" Fund?" Interested in your thoughts. Caution - its a troublesome read.
http://etfdailynews.com/2017/03/17/here ... fed-hikes/

[Aitrus]

More doom and gloom. I think the market will do what it's always done. It will go up, it will go down, and it will go back up again.

The only real incident we have of the market going down and staying down is the Great Depression, when the market tanked and stayed down for a decade (for various reasons, including bad government monetary policy). If the market ever goes down and stays down, I will have bigger worries on my plate other than my retirement account. Worries such as "Will I have a job tomorrow? How am I going to feed my kids this week?" and the like will be much more prevalent in my mind. This sentiment applies to the bond market as well.

If you look at F Fund returns when the Fed's average interest rate was higher (late '80s and through the '90s) the F Fund actually did better.

For the last 15 years (2002 - 2016) , the F Fund's CAGR was 4.75%. The interest rates during that time hovered around 1% to start, spiked up to around 5% for 2007, and dropped to 0.25% and have stayed low for almost a decade.

The 15 years prior to that (1988 - 2002), the F Fund had a CAGR of 8.19% The interest rates during those years ranged from around 10% - 2%.

This chart shows interest rates since the 1970s. http://www.tradingeconomics.com/united-states/interest-rate

I think the F Fund will be affected a little by the interest rates, but not as much as the article makes them out to be. Remember that bonds are a market, and therefore not static. It mirrors whatever investors are willing to buy and sell them for, just like with stocks. The interest rate will play a part, sure, but it's not the only horse pulling the cart.

Waaay back at the beginning of the thread I describe my standards for a "Good Month". For me, that standard is CAGR 0.5% and PNR 70% or better for the F Fund. I mention what would make me consider changing from the F Fund to the G Fund. If the G Fund were to start earning a reliable 0.5% per month again like it did in the 80s and early 90s, or if the F Fund started to not be as reliable as it has been, then I would make the switch to the G Fund. But the G Fund has a long way to go before it reaches that point. The F Fund would have to have a number of under-performing years to make the results change enough to justify the change.

All this is to answer your implied question asked above. No, I wouldn't change any seasonal patterns simply because the Fed raises rates, and I think the impact on systems that use F during certain times of year won't be greatly affected by it.

[cswift01]

Thanks Aitrus. I've been wondering about the F Fund for some time. I also think that we have quite some time to go before the G would be a better bet than the F Fund.

I hope you're not in that category that could be affected by the suggested cuts by the new administration.

Me

[Aitrus]

I work in the DoD, but there's no sacred cows. RIFs during the Obama years affected the unit I work in, so I know that there is not job that isn't subject to scrutiny. Individual jobs pale in comparison to the bigger problem that Trump is trying to solve, and I'm ok with that. I would rather have to look for work if it meant the country could stop spending at insane Bush/Obama levels of spending.

Losing one's job isn't the end of the world. I know this from experience, so I'm not worried so much about Trump's cutbacks. There's lots of opportunity out there. Just roll with the punches, don't stop, never quit, and you'll be fine in the end. We can be content and satisfied in life on much less money than we think. No matter what happens, the sun will rise on the morrow, we will continue breathing, and the world will keep spinning.

[bad70nova]

This is the first year I have decided to truly follow a seasonal strategy and so far not panning out to well. I will stick with it and see if it is for me, but so far not looking very good.

[wdd09]

This is the first year I have decided to truly follow a seasonal strategy and so far not panning out to well. I will stick with it and see if it is for me, but so far not looking very good.

Seasonal is a long term strategy so it's performance through a quarter of the year shouldn't concern you at this point. I'm up about 1.78% So far and that's not bad considering I was In F at start of year for seasonal.

[Dillon]

Gonna stay in the c fund a little longer. Sell in May.

[Aitrus]

For April 2017
Last chance to move: Friday, 31 Mar before noon EST
For this coming April, the individual funds have performed on average as follows:

G Fund
Since 1988: 0.42%
Last 20 years: 0.33%
Last 10 years: 0.22%
Last 5 years: 0.15%

April is historically an ok month of the year for the G Fund. The 2016 return was 0.14%

F Fund – A “good” month is a CAGR of 0.5% or better, and a PNR of 70% or better.
Since 1988: CAGR 0.42%, PNR 66%
Last 20 years: CAGR 0.46%, PNR 70%
Last 10 years: CAGR 0.64%, PNR 80%
Last 5 years: CAGR 0.63%, PNR 80%

April is a decent month for the F Fund, with the last decade having above average returns.

The best years were 1989 (2.05%), 2002 (1.89%) and 1997 (1.49%). The worst years were 2004 (-2.54%), 1990 (-0.94%) and 1994 (-0.81%).

C Fund – A “good” month is a CAGR of 1% or better, and a PNR of 70% or better.
Since 1988: CAGR 1.75%, PNR 76%
Last 20 years: CAGR 2.06%, PNR 75%
Last 10 years: CAGR 2.65%, PNR 90%
Last 5 years: CAGR 0.68%, PNR 80%

April continues the spring earnings season, and the C Fund has historically done pretty well in this time of year.

The best years were in 2009 (9.58%), 2003 (8.26%) and 2001 (7.78%). The worst years were 2002 (-6.06%), 2000 (-2.98%) and 1990 (-2.52%).

S Fund – A “good” month is a CAGR of 1% or better, and a PNR of 70% or better.
Since 1988: CAGR 1.52%, PNR 69%
Last 20 years: CAGR 1.65%, PNR 65%
Last 10 years: CAGR 2.72%, PNR 70%
Last 5 years: CAGR -0.47%, PNR 40%

April is usually good for the S Fund, although not as good as the C Fund. The last decade saw a few bumps that dragged down more recent stats.

The best years were 2009 (15.0%), 2001 (10.58%) and 2003 (8.31%). The worst years were 2000 (-12.03%), 2004 (-3.94%) and 2005 (-3.72%).

I Fund - A “good” month is a CAGR of 1% or better, and a PNR of 70% or better.
Since 1988: CAGR 2.52%, PNR 79%
Last 20 years: CAGR 2.56%, PNR 75%
Last 10 years: CAGR 3.53%, PNR 80%
Last 5 years: CAGR 2.16%, PNR 80%

The I Fund is the superstar of April. April is hands down the best month of the year for the I Fund. It has experienced only 6 negative years since 1988. If I had to pick a single month of the year to use the I Fund, April would be the easy pick.

The best years were 2009 (12.13%), 2003 (9.82%), and 1993 (9.34%). The worst years were 2000 (-5.36%), 2010 (-2.35%), and 2004 (-2.31%).

Note: For CAGR explanation, see 2nd post in the thread. PNR is the ratio of Positive Months vs Negative Months. A Fund that was positive in March for 4 out of 10 years would have a PNR of 40%.

Individual Seasonal Mix Allocations
Here is where the various seasonal mix allocations are going to for April 2017.

TSPCenter.com’s Seasonal Mix: Remain in the C Fund.
Jahbulon’s Basic Seasonal Mix: Remain in the C Fund. (This is the formula I normally follow with my money as the best mix that doesn’t use the I Fund.)
gclapper’s M3 Mix: Move to the I Fund
tmj100’s Mix: Move to the I Fund. (formerly known as Timboslice’s Mix)
Boltman’s Mix: Remain in the S Fund.
Sell in May and Go Away: Remain in the C Fund.
G All Year, S In Dec: Remain in the G Fund.