Dave Ramsey's TSP guidance

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Finsfan
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Dave Ramsey's TSP guidance

Post by Finsfan »

Dave Ramsey says to invest in TSP by going 60% C, 20% S, and 20% I.

How does everyone feel about this?

bprixe
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Re: Dave Ramsey's TSP guidance

Post by bprixe »

i'm a big Dave fan... he doesn't endorse TSP. he says get your 5% match, and take the rest of your investments private.

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Snapdragon
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Re: Dave Ramsey's TSP guidance

Post by Snapdragon »

I think when the market is down, you are going to be a very unhappy person. If you are considering that, why not just do an L fund?

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GT-NMSU
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Re: Dave Ramsey's TSP guidance

Post by GT-NMSU »

bprixe wrote:i'm a big Dave fan... he doesn't endorse TSP. he says get your 5% match, and take the rest of your investments private.


This is partially correct, he does encourage Roth IRAs, I don't know if he has taken a stance now that you can have a "Roth TSP".


On another note, originally Dave said in his video series:
60%-C, 20%-S, and 20%-I

but recently on his radio station, he said:
60%-S, 20%-C, and 20%-I


Regardless it is one method and uses a very well accepted "dollar cost average" approach. YMMV.

skiehawk11
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Re: Dave Ramsey's TSP guidance

Post by skiehawk11 »

Dave Ramsey is great at debt reduction. I would, IMO, take what he says about investing with a grain of salt. Large drawdowns will hinder your wealth growth. It would be smart to have a measurement of risk for your investments.

SnareMV17
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Re: Dave Ramsey's TSP guidance

Post by SnareMV17 »

Actually, last week on his show, Dave said (and I watched this on the streaming video from his site) that he endorses 80% C, 10% S and 10% I. So I'm not sure why the numbers changed, or if he really has them memorized all that well, or what. It caught me a bit off guard, that's for sure.

But Dave is a buy and hold guy, and I really don't think you're going to hear a whole lot of that from the audience here at TSP Center. So be careful where you seek your advice and take these things in to consideration.
"Get your money for nothin', and your chicks for free."

Following TSPCalc strategy #64902.

crondanet5
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Re: Dave Ramsey's TSP guidance

Post by crondanet5 »

Take a look at the return for DaveRamsey in the Fantasy Game.

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Navig8tor
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Re: Dave Ramsey's TSP guidance

Post by Navig8tor »

"DaveRamsey" the fantasy player has an a 4-year return average of 11.78%, and hasn't made an IFT since 2010. 2010 proved to be a losing year for "Dave" although he had losses of <2%.

I shoot for 12% per year in my real account. I've hit or bettered that mark 5 of the past 8 years [missed it in 2008 (-33%), 2010 (+6.87%) and 2011 (+8.38%)]. I hit 14.44% last year and I'm pace to barely touch 20% this year providing I don't get stupid....like I did a couple weeks ago :lol:

In comparison to "Dave's" one IFT over the previous four years, I normally make at least 20-24 IFT's per year, more if I'm incrementally moving to the G-fund to avoid corrections and large pullbacks and I'm not real sure when they are coming.

What's the moral of THIS story: I don't know!!

I would imagine "Dave," if he's even still playing the fantasy game, experiences a great deal less stress trying to pick entries/exits, read charts (I'm not very good) and trying to ascertain trends, sentiment, and historical data to make investment decisions. I don't know that I'd call it "stress"...probably more "aggravation" than anything else.

I was a buy-and-hold investor until 2008 when I lost 33% in the L2040. After that I, like many others, begin to think there had to be a better way. With the TSP, our options are limited; however, they are still better than many other retirement investment vehicles. I think the best "move" we have is the ability to go to safety in the G-Fund. No other major investment companies and/or personal wealth management firms that I've spoken to will sell assets to move to a cash account in the face of heavy market headwinds. They tell me if everyone sold to cash every time there was a 5-10% pullback it would only add to the GLOBAL market carnage. Yes, there are self-managed accounts in which you can move to cash but for the sake of this argument I'm talking about the TSP and other MANAGED accounts.

I have 1/3 of my assets in a professionally managed buy-and-hold account comprised of mu-funds, bonds and small allocations in other areas such as commodities The remaining 2/3 of my assets are invested in the TSP. After watching my professionally managed account rise and fall over the past 6 years, it pretty well sits only a few percentage points above where it sat in 2011. It blows my mind really. Even if you came in a couple percent UNDER the market return, I should still see better returns than I have. As well, most of that increase, I daresay, is due to my own contributions. Conversely, with my TSP account I beat the annual return of my professionally managed account most years; however, I don't get anywhere near the top of the heap as compared to the returns we see some of the folks in this fantasy game pull down every year.

So what's the moral of this story: I STILL don't know!!

After kicking buy-and-hold investing to the curb in 2010 (and dropping out of the L-Funds), wouldn't you know we've been in a 3+ year Bull Market and buy-and-hold seems to be winning out. They say the overwhelming majority of market-timers NEVER beat the market. If you look back over the previous 3+ years, as much as it pains me to say, I tend to agree with that statement.

I look at it this way: None of the paid services are beating the market. Of the 1300+ fantasy players on this site, only 29 of them are currently beating the S-Fund. I'd bet my bottom dollar that all of them are buy-and-holders. It's not hard to verify because most of them show the exact return the S-Fund is currently showing. Furthermore, only 97 of 1300+ are beating the C-Fund and I'd say the vast majority of those folks are probably S-fund squatters as well.

So here's the moral of the story as best I see it: In a bull market, buy-and-hold usually comes out ahead because market timers can't get out the way of their own moves. "A pullback is coming: a pullback is coming." In a bear market, market timing would probably win out because the timers would be more focused on catching decided upticks while avoiding heavy downdrafts, and, buy-and-holders probably wouldn't have built up a heavy cushion of house money with which to continue to feel good about squatting. Common sense, right?

From my observations over the past 4 years of actually PAYING ATTENTION; I really think the best system is a MODIFIED buy-and-hold. During the "best 6 months" you're all-in and side-step if you need to. During the not-so-good summer and early fall months, you're in and out based on the prevailing market trend.

With bond yields being what they are, you can no longer count on divergences (equities down and bonds up) so you really can't go from equities into bonds with any certainty of padding your earnings. If you do you risk big losses on a daily basis:

Here's a perfect example...and it just happened to me last month: You're up 2% on an IFT and equities appear to be approaching a top...you noticed bonds were down .5% over the previous two days so you get out of equities and go into bonds...you called the equities top, if even short term, so you're feeling good...you're in bonds hoping to catch a rebound off that .5%, 2-day loss and danged if bonds don't continue down for three more days and you lose .5%!! Meanwhile, that "top" in equities resulted in a .25% loss on the first day after you moved into bonds, followed by three days of minor upticks that resulted in a .75% gain. Had you stayed in equities you would have been up 2.75% on the month vs taking a chance in the F-Fund, losing .5% and ending the month up 1.5%.

And THAT, my friends, is what I think the major issue is with market timing (from my perspective) in bull market. When you think the market is coming down, the dip buyers step in and keep it above support. No sooner than you think it's going back up, it drops through the 50-day and people get scared. Even if you do call what is ordinarily a good move, with this QE-inflated market you just don't know WHAT is going to happen from one hour to the next, let alone one DAY to the next. Moves that would ordinarily result in gains are failing. The market blasts up for no apparent reason just as fast as it sells off for no apparent reason (yesterday between 2-4pm). It's a crap-shoot that is benefiting the buy-and-hold folks exponentially more than the market timers...at least up to this point in the year anyway.
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crondanet5
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Re: Dave Ramsey's TSP guidance

Post by crondanet5 »

How much longer are you planning to use that professional advisor?

aarvizo
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Re: Dave Ramsey's TSP guidance

Post by aarvizo »

On one of Dave FPU audio CDs from an older series he said 40%-C, 40-S, 20-I, user dramsey-T1, which has done better lately than the 60/20/20, user dramsey-T2. I also heard his 80/10/10 but havent seen the returns on that.

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Navig8tor
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Re: Dave Ramsey's TSP guidance

Post by Navig8tor »

crondanet5 wrote:How much longer are you planning to use that professional advisor?


You been asking me that for three years :lol:
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Re: Dave Ramsey's TSP guidance

Post by crondanet5 »

Yup. Getting boring asking. Why not jack up that third of your holdings to a 20% return instead of a 2% return?

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Navig8tor
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Re: Dave Ramsey's TSP guidance

Post by Navig8tor »

Because if I close the account you can bet I'll lose the green it in a matter of a year or two. :D I'd be trying to trade commodities, futures, 3X ETF's etc.

Although they don't get my desired returns for whatever reason; their substandard performance actually keeps me in check with the TSP by FORCING ME to make better IFT decisions so I can get a higher average between the accounts. At least I'm not LOSING money with them...I'm still getting dividends with those mediocre returns...and my monthly contributions seem relatively safe. Besides that, they hold my ROTH...which I need in addition to the TSP (yes, I know I can get a ROTH anywhere).

Makes ZERO sense to me why you still maintain a $17,500 yearly contribution limit if you use the TSP ROTH in conjunction with the tax-deferred TSP account. You have a $17,500 TSP limit AND a $5,500 limit if you use a ROTH outside of the TSP; therefore, why can't the TSP do the same thing? Take your tax-deferred contribution right off the top, then pay the taxman, then take your ROTH contribution?!?!?!

If the TSP can separate non-taxable combat pay from tax-deferred contributions and manage catch-up contributions on top of that, they ought to be able to open up and manage the full contribution allowance of a combined tax-deferred/ROTH account ($23,000/yr). Ya know, if you sign up for a ROTH with the TSP, that money stays under a separate division of your overall TSP account and it is managed via direct deposit, from your bank account, AFTER you've been taxed. Money cannot be moved between your TSP accounts; however, you are free to invest each account in any of the TSP funds as you see fit. That keeps the taxed money separated from the tax-deferred money. How hard would it be???

Anyway...remember when I mentioned I was about ready to relocate that cash to an investment firm whose name begins with a "P"....look at THEIR returns this year??? Blows my mind when the market is on its way to a +20% year and said company has programs with negative returns. Refer to my thoughts down this page on market timing...that company can't see to get out of its own way this year. Even the folks we PAY to make these decisions are having trouble this year.

I'm not trying to offend anyone but if you're sitting on a 12% return right now, and the market is up 21%; you ain't exactly beating the cover off the ball (that includes me). There's nothing wrong with a 12% return; I'm OK with it. However, when the market is up 21% and you've got 12% in the bank...it leaves a sour taste in your mouth. All of our lives we've been told "If you can get a return of 8%/yr year you're doing DAMN GOOD." My logic is this: if you miss the gains in years that are up huge like this year, you gotta work twice as hard in other years to make sure you get that 8%, and, there will be down years in bear markets in which you'll be LUCKY to make 3%-5%.

This is an aggravating business no matter how you look at it. If you're buy-and-hold, you're good until there is a market crash and you lose 35%. If you're a market timer and believe everything you hear about market tops, pull-backs, downturns and black swan events that you can't plan for...don't look now but the market is up 21% and you've got a 12% return!
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crondanet5
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Re: Dave Ramsey's TSP guidance

Post by crondanet5 »

Your last post is exactly why I urge you to take command of your assets. You have the knowledge and skill to become a millionaire within a year. You just have to do it.

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docrings
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Re: Dave Ramsey's TSP guidance

Post by docrings »

For the majority of persons...dollar-cost averaging has the least emotional stress and larger returns than even most of the professional advisors/investors. But, hey, they don't make money by recommending dollar-cost averaging.

Look at this TSP site and a couple others... the majority of the players don't beat the "S" fund outright... Yes, there will always be someone with a larger return...it's simple statistics and probability (like there is always a lottery winner).

Better to dollar-cost average and never listen to the news...

The only other way to do this would be the seasonal approach, but again, moving forward is always suspect due to market timing, world events, skewed Federal Reserve policies that were not in place for back-testing, etc.

There is research on higher returns by lump-sum investing (vice DCA) or value-investing (constant #share purchases vice constant $ investment)...but neither of those work as easily as with TSP and constant $ inputs monthly from a federal paycheck.

ref: Journal of Financial and Strategic Decisions, Paul Marshall, Vol. 13, No. 1, Spring 2000
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Fund Prices2024-03-28

FundPriceDayYTD
G $18.15 0.05% 1.05%
F $19.08 -0.06% -0.74%
C $82.21 0.11% 10.55%
S $82.43 0.30% 6.92%
I $42.57 -0.24% 5.95%
L2065 $16.38 0.02% 8.37%
L2060 $16.39 0.02% 8.38%
L2055 $16.39 0.02% 8.38%
L2050 $32.73 0.01% 6.95%
L2045 $14.91 0.02% 6.58%
L2040 $54.38 0.02% 6.22%
L2035 $14.34 0.02% 5.79%
L2030 $47.67 0.02% 5.38%
L2025 $13.15 0.03% 3.43%
Linc $25.61 0.03% 2.82%

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