New TSP Money Allocation Question....

[madd money]

Hello Everyone,

I am curious as to where fellow members are allocating their TSP NEW money.

After attending a Financial Seminar, they advised us to put any NEW money into the G Fund due to it's less volatile nature and steady low cost of purchase. Keeping within theme, "Buy Low, Sell High" Then to wait for a dip in the market, at which time we would do a transfer from G to ( enter your preferred allocation ).

Most of my peers on the ground just put ALL their NEW money in C, S and/ or I from the start and forget about it. This practice seems to be outside the " Buy Low, Sell High: theme as these stock prices vary greatly compared to the G fund.

My questions are: Which method do you use and is it producing a favorable net balance.

Thanks, I look forward to reading the replies.

Good Luck to all of Us and may we all reach our goals.

[DaveWine]

G is a good place to be right now with all the volatility. If you have a long time strategy to store up in G and wait for a recession, and switch to stocks that is not a bad idea. However, you may miss on some serious gains if you wait a year or so. So, hypothetically what if a trade deal gets done and the Dow jumps to 30k.

you would have missed it, and will have to buy into stocks a lot higher.

Also, if you are actively managing your account you can always move around.

Also, how old you are and close to retirement should have some bearing on this as well!

[bloobs]

your strategy of (trying to) timing the market is common, but empirically tends to be outperformed over the long term by low mantenance buy and hold equities strategies--simply because there is no one size fits all consistent indicator of when to buy or sell. the factors are never exactly the same each time.

of course, there are even more profitable strategies than buy and hold. those would take a lot more babysitting.

bottom line, pick a strategy, stick with it long enough to find out if it works with you, and be prepared to move on to another one of it doesnt.

[TopNotch]

It depends on your risk tolerance and how close you are to retirement.

If you have a long time frame and are willing to take risk, putting new money into C, S, or I works by dollar cost averaging which reduces the risk by spreading out the purchase price versus trying to buy shares at a low price.

https://www.investopedia.com/investing/ ... ging-pays/

[madd money]

Thank you both for your replies, Very good information and advise to ponder. I do have one more question; is THERE ANY TSP shelter option that is NOT influence by the stock market? ( thinking this is STUPID question as I hear myself ask it, but still have to ask so please keep the sarcastic remarks down to a minimum ) thanks

[comrade]

I keep mine the same as my account distribution.

[Sky5HD]

Where are the strategies found?

[Brownstone]

The G fund is your "shelter" low volatility, and always in the green. Look into Aitrus’ post on Seasonal Musings, a seasonal strategy is the way to go imo.

Seasonal Musings 2019: http://tspcenter.com/forums/viewtopic.php?f=14&t=16647
Recommended Reading: http://tspcenter.com/forums/viewtopic.php?f=14&t=13474

[Sky5HD]

G fund is always green but will not keep you afloat in the long-term.

[Eliaj]

The theory you mentioned about just chucking money into C, S, I may be referring to dollar-cost averaging. While I'm not entirely sure it is relevant to the TSP, as I am not sure we really deal with "shares", as opposed to just allocating money to the fund, it still may be useful to know the theory.

Your friends could always just be following a set it and forget it strategy as well, which is also pretty low maintenance.

[madd money]

I am truly appreciative of everyone's time and continued shared information. It really helps us uneducated...

[Aitrus]

Hello Everyone,

I am curious as to where fellow members are allocating their TSP NEW money.

...

My questions are: Which method do you use and is it producing a favorable net balance.

Hey madd money. This question comes up now and then. Here's my response to the last time somebody asked about it:

Doc-Rush,

I did a short study a couple of years ago on the plusses and minuses of contributing under different scenarios. In short, here's what I found out: mathematically, you end up paying less per share if you build up a stockpile of money in the G Fund and buy in when prices fall a lot. You end up paying a lot less per share, but it only works with small accounts.

The problem with this scenario is that it can be quite a long time before you get a fall in prices deep enough to justify buying in with your saved up funds, and the stockpile needs to be big. In the meantime, that money has been sitting in the G Fund, earning next to nothing. And while your money has been sitting, the market likely has risen so far that even a significant pullback of 10% or more simply takes the prices back to the point where you first started putting money into the G Fund. So while you pay less per share, you also end up missing out on earnings during bull markets.

Then there's the size of the account. The larger the account, the less the saved cash makes a difference in the numbers. In the end, the math says that the difference to a large account is so small as to be a wash. Mathematically, the strategy of saving money for a large purchase of stocks during a pullback works only when the amount of cash to buy more stocks at a discount is around 5% of the total value of the account and the stock pullback is at least 12%. If either figure is smaller, the math says it's not worth your time and emotion of saving the money and deciding when to buy in.

My advice for a seasonal investor: just match your contributions to the seasonal pattern. It's the best balance of dollar-cost-averaging and time management.

[GoSeasonal]

Excellent advice.

[JackKnife]

I am truly appreciative of everyone's time and continued shared information. It really helps us uneducated...

[madd money]

Aitrus,

Thank you for forwarding your read from Doc-Rush, great end result opinion...I do believe that the Seasonal method is a GO.

Thanks again to ALL those that post and spread the knowledge!!!!

May the Dip subside soon and reach NEW highs before the end of the year!

Cheers