Hi everyone – It’s your govloop weekly dose of TSP Talk from www.tsptalk.com.
Similar to September and October, the first week of November got off to a very strong start with all of the the major U.S. stock market indices picking up some impressive gains.
Over the last few months, being in the TSP stock funds during the first week or two of the month has clearly paid off.
Chart courtesy of www.decisionpoint.com
For November it has translated into gains of 2.5% to 3.4% for the TSP stock funds during the first 5 trading days. The S-fund led the way with a 3.42% gain, the C-fund picked up 3.25%, and despite lagging, the I-fund added an impressive 2.51%. The F-fund slipped 0.17% as investors preferred stocks over bonds.
As you probably know, TSP participants are able to actively manage their accounts by making two interfund transfers per month. (You can actually do more, but I will talk about that below.) The market is rarely an easy puzzle to solve, and many times when you have discovered a short-term pattern, it quickly fades. But right now we have a small blue print showing us that stocks are acting much better during the early weeks of the month, and giving back some of those gains in the latter weeks.
Although it is not shown above, the strong monthly starts actually go back to July making it five months in a row, although August’s gain didn’t quite last two weeks, and July’s gain held the entire month. But with the market seemingly getting a little tired after a 7-month rally, I will be surprised if Novembers gains continue too much longer – that is, I suspect the latter half of November could give back some of the early gains.
Lets get back to the interfund transfer rules: You are permitted to make two interfund transfers per month. It doesn’t matter what they are. You can put all your money in one fund, or split it out how you see fit among the 10 funds – although I do not recommend “trading” the L-funds as they are set up more as diversified, buy and hold vehicles.
Now, here is something some of you may not know. After you have made two transfers, you are allowed to make additional transfers if, and only if, you are moving money into the G-fund. This was done to allow you to protect your account by running to cash (G-fund) at any time you wish.
There is not a limit to the number of transfer you can make into the G-fund. Here’s an example:
If you begin the month with an allocation of: 100% C-fund, and you make a transfer to 100% G-fund, you have made your first interfund transfer. Maybe stocks drop and you decide you want to get back into the stock funds so you make a second interfund transfer to 50% C-fund and 50% S-fund. You have now completed your two interfund transfers for the month.
But suppose the market continues to decline and you start to get a little nervous. You can make additional interfund transfers moving money from the other funds into the G-fund. As long as the G-fund is the only fund whose allocation is increasing, you are OK.
There is no limit on this type of transaction. You can move 100% of your money into the G-fund all at once (in which case you would be done for the month), or you can make it in smaller increments – as little as 1% at a time.
This is a good strategy to use when the market is rising. If you have been making money in the stock funds and you are considering taking money out, but don’t want to miss out on potential continued gains, you can move your money into the G-fund 10% at a time, as an example, until you are eventually fully in the G-fund.
You do have control over your TSP account, so don’t be afraid to use your interfund transfers. If you have trouble deciding what to do, come visit us at TSP Talk.com. We may be able to help.
Good luck, and thanks for reading! We will be back here next week with another TSP Weekly Wrap Up.