TSPinvestor Basic January 2016 Allocations

The TSPinvestor Basic allocations for January 2016 are:

8% G Fund; 22% F Fund; 22% C Fund; 41% S Fund; 7% I Fund

These should be allocated prior to Jan 4, 2016 at noon EST.  The Plus and Apex allocations will be released on Jan 8, 2016.

To implement this allocation, login to your account and change the fund allocations (via interfund transfer) and your new contributions to the recommended percentage.  These take effect the same business day if done before noon Eastern Time, otherwise it will be the next day.

The TSPinvestor Basic is a nominal 12% annual return strategy, and is less volatile than the Plus and Apex.

Last month’s Basic performance was (1.8)% – a negative return.

Here is a comparison of the TSPi Basic, various allocations strategies, and the TSP funds performance for December 2015:

TSPinvestor Basic = (1.8)%

50% C & S = (2.7)%

1/3 each in C, S & I = (2.5)%

20% in each fund = (1.5)%

G Fund = 0.2%

F Fund = (0.3%)

C Fund = (1.6)%

S Fund = (3.9)%

I Fund = (2.0%)

() – denotes negative returns

In evaluating the performance on a month-to-month basis it is important to consider they vary widely. It is better to evaluate the returns over the course of a year or two, or ten.

Jan 2016 Allocations Graphic

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TSPinvestor Plus and Apex Allocations for Dec 2015

The TSPinvestor Plus and Apex allocations for December 2015 are:

Plus: 4% G Fund; 6% F Fund; 26% C Fund; 64% S Fund; 0% I Fund

Apex: 100% S Fund

These should be allocated on Dec 9, 2015 (in the a.m.)

To implement this allocation, login to your account and change the fund allocations (via interfund transfer) and your new contributions to the recommended percentage.  These take effect the same business day if done before noon Eastern Time, otherwise it will be the next day.

The TSPinvestor Apex is a nominal 23% annual return strategy, and the Plus is a nominal 19% annual return.

Last month’s Plus performance was (1.7%), a negative percentage, i.e. a loss. And had there been an Apex recommendation last month it would’ve recommended 100% in S Fund, which was a (3.0%) loss.

Overall the stock markets lost money, while the bond market slightly gained.

Here is a comparison of the various allocations and funds performance for November 2015:

TSPinvestor Plus = (1.7%)

TSPinvestor Apex = (3.0%)

50% C & S = (2.3%)

1/3 each in C, S & I = (2.1%)

20% in each fund = (1.1%)

G Fund = 0.2%

F Fund = 0.5%

C Fund = (1.5%)

S Fund = (3.0%)

I Fund = (1.8%)

NOTE: These are like comparisons based upon allocations on the 9th of the month.

Dec 2015 Allocations Graphic

Allocation Strategies

What is your strategy for Thrift Savings Plan (TSP) allocations?  If you have a TSP account, then you have a strategy – even if you’re doing nothing with it.

When considering a strategy to allocate your Thrift Savings Plan money, an understanding of each strategy and their benefits to you is essential. Each strategy involves risk (of losing money) and an expected return (how much money is made over time). In general the higher the risk tolerance, the better the potential money to make. There are six different strategies to use, explained below:

Strategic Asset Allocation – Also known as Buy and Hold, this strategy is executed by allocating a certain percentage to each fund and then leaving its allocation the same for long periods of time. The actual percentage to allocate is dependent upon how much risk is tolerated.

For example, a young person with many years to retirement may be willing to endure the risk (short-term loss) to gain the long-term high gains in choosing stock-heavy investment. While an older person, nearing retirement may wish to invest in the no risk G Fund, or lower risk F Fund, while getting less returns. A choice to invest for a long period in 50% C Fund (7% return expected) and 50% S Fund (8.5% expected return), gets an expected return of 7.75% (the combination of the two).

Constant-Weighting Asset Allocation – This approach uses the buy and hold, or Strategic Asset Allocation above, with a rebalance of the percentage in each account periodically. The assures that the original strategy is adhered to even as one fund may gain more than another and hence increase the fund balance. This is considered less risky to achieving the investor’s goal, than leaving the balance unadjusted.

For example, an investor has allocated 40% C Fund, 30% S Fund, and 30% F Fund.  And over the course of a year the C Fund has gained 5%, the S Fund has gained 1%, and the F Fund has lost 2%, so that the allocation now stands at 41.3% C Fund, 29.8% S Fund, and 28.9% F Fund. The strategy calls for an interfund transfer with the original percentages of 40%, 30%, and 30%.

Tactical Asset Allocation – When there are short term opportunities to gain bigger returns, moving money between funds to take advantage is using Tactical Asset Allocation.  However once the short-term opportunity is finished, a move back the a Strategic Asset Allocation is done. The realization of these short-term opportunities are difficult to time right, and have some risk of being incorrect.

For example, an investor has recognized that the stock market keeps losing money and decides to avoid losses by moving money from the C Fund to the F Fund for 3 months.  And at the end of 3 months moves the money back to the C Fund.

Dynamic Asset Allocation – The constant changing of allocations based upon market conditions to achieve greater returns is Dynamic Asset Allocation. Ideally money is moved out of a declining fund, and moved into a more profitable fund. This is anticipating the future returns to be based upon historical information, or upon information that indicates what the performance will be. This can be a risky approach if there isn’t good information – but with good information, this will have better returns than other strategies.  All three of the TSPinvestor strategies (Basic, Plus, Apex) use this.

For example, using the TSPinvestor Apex an investor changes allocations every month as scheduled, and at the recommended percentage. The allocation percentages move money to avoid short-term losses and take advantage of short-term gains.

Insured Asset Allocation – This strategy is used to insure a minimum return, while trying to gain more by using other strategies when the minimum is met. It is typically invested in risk-free (such as the G Fund).

For example, an investor decides that he/she wants a minimum of 1% return guaranteed per year. The risk-free G Fund is expected to gain 3% for the year. And so some risky stock investing (C Fund) is made, and if there are losses, the money is moved back into the G Fund to guarantee the minimum return. If there are gains a strategy to reserve some of the funds for the guarantee return is made and remaining is continued in the stocks.

Integrated Asset Allocation – This strategy is combination of any of the above strategies in a mix that suits the investor. Its advantage is giving the investor the opportunity to manage risk to suit his/her tolerance.

TSPinvestor Basic December 2015 Allocations

The TSPinvestor Basic allocations for December 2015 are:

11% G Fund; 27% F Fund; 28% C Fund; 34% S Fund; 0% I Fund

These should be allocated on Dec 1, 2015 (in the a.m.)  The Plus and Apex allocations will be released on Dec 8, 2015.

To implement this allocation, login to your account and change the fund allocations (via interfund transfer) and your new contributions to the recommended percentage.  These take effect the same business day if done before noon Eastern Time, otherwise it will be the next day.

The TSPinvestor Basic is a nominal 12% annual return strategy, and is less volatile than the Plus and Apex.

Last month’s Basic performance was 0.1%.

Here is a comparison of the various allocations and funds performance for November 2015:

TSPinvestor Basic = 0.1%

50% C & S = 1.0%

1/3 each in C, S & I = 0.4%

20% in each fund = 0.2%

G Fund = 0.2%

F Fund = (0.2%)

C Fund = 0.3%

S Fund = 1.7%

I Fund = (0.9%)

Dec 2015 Allocations Graphic

introducing TSPinvestor Apex

A new strategy is being introduced which gives better returns than both the Basic and Plus  — the Apex. The returns of Apex exceed the Plus by 4% annually – a 10-year annual return of about 23% (the Plus is about 19%; Basic is 12%).

The Apex uses the Plus strategy as a base, but includes a more aggressive maneuver during months when the top allocations fund is better than the next by more than 9% – it allocates 100% to the top fund.

So for example, say the Plus recommends 35% C, 25% S, 15% I, 15% F and 5% G.  Because the highest recommendation (C Fund, 35%) is larger than the 2nd highest (S Fund, 25%) by at least 9%, the Apex then recommends 100% allocated to highest fund (C Fund) and none to the others.

If the difference is less than 9% between the highest and the next highest, then the TSP Plus allocations are used.

The data charts will be updated to include the Apex – but another post (comparisons) already shows the Apex performance.

As with the Plus, the recommendation will come on/about the 9th of the month.

Time will tell if the actual performance matches the expected.

TSPinvestor performance compared to other options

In looking at options for getting best investment of your money in the Thrift Savings Plan (TSP), a comparison of returns of various lengths of time is very useful; and a look at how volatile, or unpredictable, a fund/strategy is compared to each other, is useful,as well.

There are fixed allocation (buy and hold) investment options, or ones such as the TSPinvestor where the allocations are changed frequently.  Either way, the information is powerful to deciding your strategy.

Below you’ll find various options and their returns.

10-Year Annual (2005-2014)

  1. TSPinvestor Apex = 23.3%
  2. TSPinvestor Plus = 19.3%
  3. TSP Millionaire = 17.9%
  4. TSPinvestor Basic = 12.1%
  5. S Fund only = 9.4%
  6. TSP Pilot Aggressive = 9.0%
  7. 50% C & S = 8.9%
  8. TSP Folio = 8.6%
  9. C Fund only = 7.7%
  10. 33.3% in C, S & I = 7.4%
  11. 20% in each = 6.4%
  12. F Fund only = 4.9%
  13. I Fund only = 4.6%
  14. G Fund only = 3.2%

5-Year Annual (2010-2014)

  1. TSPinvestor Apex = 18.8%
  2. TSP Millionaire = 17.4%
  3. S Fund only = 17.1%
  4. TSPinvestor Plus = 16.3%
  5. 50% C & S = 16.3%
  6. C Fund only = 15.5%
  7. 33.3% in C, S & I = 12.7%
  8. TSP Pilot Aggressive = 11.1%
  9. TSPinvestor Basic = 9.4%
  10. 20% in each = 9.0%
  11. TSP Folio = 8.9%
  12. I Fund only = 5.5%
  13. F Fund only = 4.7%
  14. G Fund only = 2.2%

3-Year Annual (2012-2014)

  1. S Fund only = 20.9%
  2. 50% C & S = 20.7%
  3. C Fund only = 20.4%
  4. 33.3% in C, S & I = 17.5%
  5. TSPinvestor Apex = 13.4%
  6. TSP Millionaire = 13.3%
  7. TSPinvestor Plus = 12.5%
  8. TSP Pilot Aggressive = 11.8%
  9. 20% in each = 11.4%
  10. I Fund only = 11.1%
  11. TSP Folio = 10.2%
  12. TSPinvestor Basic = 9.4%
  13. F Fund only = 3.1%
  14. G Fund only = 1.9%

1-Year Annual (2014)

  1. C Fund only = 14.6%
  2. 50% C & S = 11.7%
  3. TSPinvestor Apex = 10.7%
  4. TSPinvestor Plus = 9.9%
  5. TSP Folio = 8.8%
  6. S Fund only = 7.7%
  7. F Fund only = 7.3%
  8. TSP Pilot Aggressive = 6.0%
  9. TSPinvestor Basic = 5.7%
  10. 33.3% in C, S & I = 5.3%
  11. 20% in each = 5.1%
  12. G Fund only = 2.3%
  13. TSP Millionaire = (0.4)%
  14. I Fund only = (6.2)%

Volatility – annualized (smaller is less risky)

  1. G Fund only = 0.3%
  2. F Fund only = 3.1%
  3. TSP Folio = 5.4%
  4. TSPinvestor Basic = 10.0%
  5. TSP Pilot Aggressive = 10.0%**
  6. 20% in each = 10.0%
  7. TSPinvestor Plus = 13.5%
  8. C Fund only = 14.5%
  9. TSP Millionaire = 14.5%**
  10. TSPinvestor Apex = 15.2%
  11. 50% C & S = 16.3%
  12. 33.3% in C, S & I = 16.3%
  13. S Fund only = 18.0%
  14. I Fund only = 18.4%

** estimated

Sharpe Ratio – using G Fund as baseline low risk investment. Higher number indicates more desirable fund to invest in.

  1. TSPinvestor Apex = 1.32
  2. TSPinvestor Plus = 1.19
  3. TSP Millionaire = 1.01
  4. TSP Folio = 1.00
  5. TSPinvestor Basic = 0.89
  6. TSP Pilot Aggressive = 0.58
  7. F Fund only = 0.55
  8. 50% C & S = 0.35
  9. S Fund only = 0.34
  10. 20% in each = 0.32
  11. C Fund only = 0.31
  12. 33.3% in C, S & I = 0.26
  13. I Fund only = 0.08
  14. G Fund only = 0.00 (base)

What does this mean?  After assessing all the options here, the best is either TSPinvestor Apex, or TSPinvestor Plus.  Each provide excellent returns and relatively low risk. The Sharpe Ratio shows each to be solidly above the other options.

But there is also some good evidence that the monthly allocation strategies are clearly above the buy and hold (or fixed) strategies.  The Sharpe Ratio for these are all above the other options by significant amounts.

TSPinvestor Apex is an aggressive fund which puts 100% in one of the funds if it appears to be a clear favorite. If the TSPinvestor Plus’ top allocation is at least 9% greater than the 2nd best, then TSPinvestor Apex puts 100% in that top allocation, otherwise it matches the TSPinvestor Plus.

TSPinvestor Plus is an aggressive fund which uses leading economic indicators, and historical TSP fund information to determine monthly allocations.

TSPinvestor Basic is an aggressive fund which uses historical TSP fund information to determine monthly allocations.

TSP Folio is a monthly allocation service offered by subscription (not affiliated with TSPinvestor).

TSP Millionaire is a monthly allocation service  offered by subscription (not affiliated with TSPinvestor).

TSP Pilot Aggressive is a monthly allocation service offered by subscription (not affiliated with TSPinvestor).

 

 

 

 

 

 

 

 

 

 

the I Fund .. what is it?

The Thrift Savings Plan (TSP) International Stock Index Investment Fund, or I Fund, offers a potentially high return by investing in the stocks of large companies in developed countries outside the U.S. The goal of the fund is to match the performance of the MCSI EAFI Index, which includes countries in Europe, and the Australasia/Far East. The risk to returns are the decline of company stock value (market risk) and increases to the value of the dollar (currency risk).

The 10-year (2005-2014) annual return is 4.58% and is 4.56% since its inception in May 2001. There is about $33 Billion invested in the fund and it charges 2.9 Basis Points ($0.29 per $1000 balance). The fund is managed by BlackRock Institutional Trust Company.

The countries included in the index are: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, Australia, Hong Kong, Israel, Japan, New Zealand, and  Singapore. There are more than 900 companies in the index.

The largest holdings in the I Fund are (as of December 2014):

Nestle (wiki)

Royal Dutch Shell Class A (wiki)

Novartis (wiki)

BP (wiki)

Roche Holding Ltd Genussch (wiki)

Commonwealth Bank of Australia (wiki)

HSBC Holdings (wiki)

Bayer (wiki)

Toyota Motor Corporation (wiki)

Total (wiki)

The TSPinvestor Basic and Plus each utilize the I Fund at various times as an alternative/compliment to the C and S Funds.

TSP Fund Information – March 2015

MSCI EAFE Stock Index