Seasonal Musings 2018

General TSP Discussion.

Moderator: Aitrus

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evilanne
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Re: Seasonal Musings 2018

Post by evilanne »

8-)

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Aitrus
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Re: Seasonal Musings 2018

Post by Aitrus »

For July 2018
Last chance to move: Friday, 29 June before noon EST

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

G Fund
Since 1988: 0.43%
Last 20 years: 0.33%
Last 10 years: 0.21%
Last 5 years: 0.18%

July is the best time of year for the G Fund. The 2017 return was 0.19%.

F Fund
– A “good” month is a CAGR of 0.5% or better, and a PNR of 70% or better.
Since 1988: CAGR 0.75%, PNR 77%
Last 20 years: CAGR 0.56%, PNR 75%
Last 10 years: CAGR 0.74%, PNR 80%
Last 5 years: CAGR 0.35%, PNR 80%

In terms of both CAGR and PNR, July is hands-down the best month of the year for the F Fund. That said, there hasn’t been a positive return over 1% since 2012’s 1.38% return. So depending on your view of things, the F Fund is either in a slump and due for a good year, or it’s turning over a bad leaf and is becoming more unfavorable this time of year. Time will tell.

The best years were 1997 (2.69%), 2001 (2.22%) and 1989 (2.06%). The worst years were 2003 (-2.51%), 2005 (-0.84%) and 1988 (-0.49%).

C Fund – A “good” month is a CAGR of 1% or better, and a PNR of 70% or better.
Since 1988: CAGR 1.14%, PNR 53%
Last 20 years: CAGR 0.42%, PNR 50%
Last 10 years: CAGR 2.42%, PNR 70%
Last 5 years: CAGR 2.29%, PNR 80%

July is an odd duck for the C Fund. The CAGRs are generally good, but the PNRs could be better. This means that the good years are solid enough to make up for the losses by quite a bit, but it’s a coin flip as to whether it’ll be an up year or down. The up years tend to be pretty good ones – of all the positive years (16 total), only one was less than 1.4%. The down years tend to be mediocre losses of -2% or less in most cases - only 5 of the 14 losses registered a -3.10% hit or worse. In the long run you win if you take the bet, but be ready for some frustrations if you do. If you don’t want to take the bet, go to the F or I Funds.

The best years were 1989 (8.83%), 1997 (7.94%) and 2009 (7.58%). The worst years were 2002 (-7.70%), 1996 (-4.39%) and 2004 (-3.24%).

S Fund
– A “good” month is a CAGR of 1% or better, and a PNR of 70% or better.
Since 1988: CAGR 0.20%, PNR 47%
Last 20 years: CAGR -0.56%, PNR 35%
Last 10 years: CAGR 1.91%, PNR 50%
Last 5 years: CAGR 1.70%, PNR 60%

July is one of the few months where the C and S Funds diverge greatly in their performance. Stay away from the S Fund in July – it’s not worth the risk.

The best years were 2009 (8.66%), 2010 (7.00%) and 1997 / 2013 (both 6.88%). The worst years were 2002 (-9.93%), 1996 (-7.51%) and 1998 (-5.66%).

I Fund - A “good” month is a CAGR of 1% or better, and a PNR of 70% or better.
Since 1988: CAGR 1.39%, PNR 67%
Last 20 years: CAGR 0.75%, PNR 60%
Last 10 years: CAGR 2.81%, PNR 70%
Last 5 years: CAGR 2.64%, PNR 80%

July is pretty good for the I Fund, arguably the third best of the year. If you like the C Fund’s gamble I spoke of above and don’t have an issue with the I Fund, then you can improve your odds a bit by going international.

The best years were 1989 (12.45%), 2010 (10.78%), and 2009 (9.74%). The worst years were 2002 (-9.99%), 2000 (-4.29%), and 2008 (-3.72%).

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 July 2018.


Jahbulon’s Basic Seasonal Mix: Move to the C Fund.
gclapper’s M3 Mix: Move to the I Fund
TSPCenter.com’s Seasonal Mix: Remain in the F Fund.
tmj100’s Mix: Move to the C Fund.
Boltman’s Mix: Move to the I Fund.
Sell in May and Go Away: Remain in the G Fund.
G All Year, S in Dec: Remain in the G Fund.
Seasonal Musings 2022: viewtopic.php?f=14&t=19005
Recommended Reading: http://tspcenter.com/forums/viewtopic.php?f=14&t=13474
"It's not what happens to you, but how you react to it that matters" Epictetus

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evilanne
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Re: Seasonal Musings 2018

Post by evilanne »

Thank you Aitrus!

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Billionair
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Re: Seasonal Musings 2018

Post by Billionair »

This week needs to rally, this month has been tough.
-What we do in Life, echoes in Retirement-

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bamablue
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Re: Seasonal Musings 2018

Post by bamablue »

I think any (real) rally would depend on the Federal Funds rate. The rate was at near zero 6 years into a modest, but steady economic expansion. That’s dangerous to continue and we may be topping-off.

Cutting the federal funds rate is one of the big weapons the Fed as at its disposal (especially during a financial crisis). I'm not calling the last 6-9 months of volatility 'a crisis', but leaving it near zero impairs their ability to act or to give the economy some breathing room. I hate to see rates increase, but even with a modest increase, the rate is still at a very low rate historically. I think of a Fed Funds Rate as an economic pressure valve.

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Re: Seasonal Musings 2018

Post by OkieTSPer »

Thanks Aitrus.

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mjedlin66
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Re: Seasonal Musings 2018

Post by mjedlin66 »

Aitrus, I don't suppose I could talk you into using average instead of CAGR?

1) Using CAGR for a discontinuous time period does not make sense. The whole point of CAGR is to account for compound growth, which occurs over a continuous timeframe. By looking at one month in multiple years, you are studying a discontiuous timeframe. The gains you end July 2016 with do not directly factor into what you start July 2017 with.

2) CAGR, by accounting for compounding, gives a bias to early years. You could have the same set of returns (1%, 3%, and 5%), and change the CAGR just by reordering them (5%, 3%, 1%). However, the average from those two data sets is the same. When studying one month from multiple years, I would say that the order in which the returns fall should not factor into the statistic that I use to decide if it is a good month or not.

Matt
Owner/creator of TSPcalc.com - "Know your numbers"

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userque
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Re: Seasonal Musings 2018

Post by userque »

mjedlin66 wrote:Aitrus, I don't suppose I could talk you into using average instead of CAGR?

1) Using CAGR for a discontinuous time period does not make sense. The whole point of CAGR is to account for compound growth, which occurs over a continuous timeframe. By looking at one month in multiple years, you are studying a discontiuous timeframe. The gains you end July 2016 with do not directly factor into what you start July 2017 with.

2) CAGR, by accounting for compounding, gives a bias to early years. You could have the same set of returns (1%, 3%, and 5%), and change the CAGR just by reordering them (5%, 3%, 1%). However, the average from those two data sets is the same. When studying one month from multiple years, I would say that the order in which the returns fall should not factor into the statistic that I use to decide if it is a good month or not.

Matt
Care to discuss this with other than @Aitrus?
"In the land of idiots, the moron is King."

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mjedlin66
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Re: Seasonal Musings 2018

Post by mjedlin66 »

userque wrote:
Care to discuss this with other than @Aitrus?
The more the merrier. What say you?
Owner/creator of TSPcalc.com - "Know your numbers"

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userque
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Re: Seasonal Musings 2018

Post by userque »

mjedlin66 wrote:The more the merrier. What say you?
Continuous compounding is not the same as CAGR. (Continuous is ... continuous. Whereas CAGR is compounded periodically.) Agree?
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mjedlin66
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Re: Seasonal Musings 2018

Post by mjedlin66 »

CAGR calculations use the daily share prices, while technically not "continuous", it is as continuous as we're gonna get. But when analyzing CAGR on an annual basis, we don't skip over anything. When applying CAGR to a single month across multiple years, you are skipping 11 months worth of compounding. So why even use CAGR?
Owner/creator of TSPcalc.com - "Know your numbers"

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userque
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Re: Seasonal Musings 2018

Post by userque »

mjedlin66 wrote:CAGR calculations use the daily share prices, while technically not "continuous", it is as continuous as we're gonna get. But when analyzing CAGR on an annual basis, we don't skip over anything. When applying CAGR to a single month across multiple years, you are skipping 11 months worth of compounding. So why even use CAGR?
Ok. I just wanted to clarify.

I see your point.

Maybe call it the CMGR (Compounded Monthly Growth Rate :) ) or, actually calculating the annualized rate would work. (It may be interesting for some to imagine: "Wow ... what if I made that return all year!?" -- even though the rate is only relating to one month out of a year.)

Full disclosure: the nomenclature (used for the musings purpose) never really bothered me. :)
"In the land of idiots, the moron is King."

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Aitrus
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Re: Seasonal Musings 2018

Post by Aitrus »

mjedlin66 wrote:CAGR calculations use the daily share prices, while technically not "continuous", it is as continuous as we're gonna get. But when analyzing CAGR on an annual basis, we don't skip over anything. When applying CAGR to a single month across multiple years, you are skipping 11 months worth of compounding. So why even use CAGR?
I think you may be mistaken as to what data set I use. I don't use daily share prices, I use end of month returns as provided by TSP.

When I post my monthly updates I use the CAGR to show how that specific Fund/month combination perform. If I'm showing historical data for July, I don't want to include data from any of the other 11 months because I want to show how July has performed. Basically, if you used X Fund in July for the last X years, here is the average return you would have received, including accounting for the effect of negative compounding during negative years.

Maybe you're using a different CAGR calculation than I am such that earlier years are treated differently. The way I use CAGR doesn't give extra credence to early years, it treats each year with the same weighting, meaning, that each year is considered equally in the calculation. While it is true that CAGR does more accurately compute compounding when used to grow the account balance, it is more accurate than a straight mathematical average when it comes to determining realistic returns.

Let's use your example above of years with returns of 5%, 3%, and 1% vs. 1%, 3%, and 5%. The CAGR for both of these sets of data is the same: 2.99%. All data points are treated the same no matter when they occur in the timeline. The mathematical average return for these is 3.00%. Since the data points are all the positive and there's only three of them, there's not much variance.

Let's change it to 5%, -3% and 1%. The CAGR is 0.95% and remains identical no matter the order of years you choose to place them in. However, the mathematical average is 1.00%. Now we see a bigger variance between CAGR and average, and the more years you add along with more negative returns, the larger the difference will become, with CAGR always being lower.

Since CAGR is always lower, it's what I use so as to avoid inflated expectations of potential returns. It helps manage expectations and gives me a more accurate reflection of what returns I can expect to see for X Fund in X Month over the long run.

Does that make sense? Or am I not understanding your questions correctly?
Seasonal Musings 2022: viewtopic.php?f=14&t=19005
Recommended Reading: http://tspcenter.com/forums/viewtopic.php?f=14&t=13474
"It's not what happens to you, but how you react to it that matters" Epictetus

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mjedlin66
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Re: Seasonal Musings 2018

Post by mjedlin66 »

Aitrus wrote:
mjedlin66 wrote:CAGR calculations use the daily share prices, while technically not "continuous", it is as continuous as we're gonna get. But when analyzing CAGR on an annual basis, we don't skip over anything. When applying CAGR to a single month across multiple years, you are skipping 11 months worth of compounding. So why even use CAGR?
I think you may be mistaken as to what data set I use. I don't use daily share prices, I use end of month returns as provided by TSP.

When I post my monthly updates I use the CAGR to show how that specific Fund/month combination perform. If I'm showing historical data for July, I don't want to include data from any of the other 11 months because I want to show how July has performed. Basically, if you used X Fund in July for the last X years, here is the average return you would have received, including accounting for the effect of negative compounding during negative years.

Maybe you're using a different CAGR calculation than I am such that earlier years are treated differently. The way I use CAGR doesn't give extra credence to early years, it treats each year with the same weighting, meaning, that each year is considered equally in the calculation. While it is true that CAGR does more accurately compute compounding when used to grow the account balance, it is more accurate than a straight mathematical average when it comes to determining realistic returns.

Let's use your example above of years with returns of 5%, 3%, and 1% vs. 1%, 3%, and 5%. The CAGR for both of these sets of data is the same: 2.99%. All data points are treated the same no matter when they occur in the timeline. The mathematical average return for these is 3.00%. Since the data points are all the positive and there's only three of them, there's not much variance.

Let's change it to 5%, -3% and 1%. The CAGR is 0.95% and remains identical no matter the order of years you choose to place them in. However, the mathematical average is 1.00%. Now we see a bigger variance between CAGR and average, and the more years you add along with more negative returns, the larger the difference will become, with CAGR always being lower.

Since CAGR is always lower, it's what I use so as to avoid inflated expectations of potential returns. It helps manage expectations and gives me a more accurate reflection of what returns I can expect to see for X Fund in X Month over the long run.

Does that make sense? Or am I not understanding your questions correctly?
Aitrus, what formula are you using? I don't see how you could possibly calculate CAGR in a way that doesn't favor earlier years.
Owner/creator of TSPcalc.com - "Know your numbers"

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userque
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Re: Seasonal Musings 2018

Post by userque »

Aitrus wrote:Let's change it to 5%, -3% and 1%. The CAGR is 0.95% and remains identical no matter the order of years you choose to place them in.
mjedlin66 wrote:Aitrus, what formula are you using? I don't see how you could possibly calculate CAGR in a way that doesn't favor earlier years.
I can’t speak for Aitrus, but using the CAGR formula far below:

$10000 * 1.05 * 0.97 * 1.01=$10286.85
$10000 * 0.97 * 1.05 * 1.01=$10286.85
$10000 * 1.05 * 1.01 * 0.97=$10286.85
… etc.

Order doesn’t matter (via the associative property).

Therefore, ending balance is the same, regardless of the order you apply the percentages.

So, using the below formula, the CAGR remains the same for all permutations of the percentages … about 0.95%

http://www.investinganswers.com/financi ... -cagr-1096
The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.

The formula for CAGR is:

CAGR = (EV / BV)^(1 / n) - 1

where:

EV = Investment's ending value
BV = Investment's beginning value
n = Number of periods (months, years, etc.)
"In the land of idiots, the moron is King."

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Fund Prices2024-03-27

FundPriceDayYTD
G $18.14 0.01% 1.00%
F $19.09 0.26% -0.68%
C $82.11 0.87% 10.42%
S $82.19 1.48% 6.61%
I $42.68 0.56% 6.21%
L2065 $16.38 0.84% 8.36%
L2060 $16.38 0.84% 8.36%
L2055 $16.39 0.84% 8.36%
L2050 $32.73 0.71% 6.94%
L2045 $14.91 0.67% 6.56%
L2040 $54.37 0.63% 6.20%
L2035 $14.34 0.58% 5.77%
L2030 $47.66 0.53% 5.35%
L2025 $13.14 0.31% 3.40%
Linc $25.60 0.24% 2.79%

Live Charts

Pending Allocations

Under development. For now, you may view Pending Allocations by going to "fantasy TSP" and selecting "Leaderboard sort" of "Pending Allocations".