In my previous article I showed you how to invest in the Thrift Savings Plan successfully. Today I am going to show you how to maximize your Thrift Savings Plan this indicator! If you haven’t read my initial write up I suggest giving it a quick read before proceeding.
TSP Indicator Overview
Since 1990 we have had three major bull markets which the indicator has signaled. Below are the dates of the triggers:
- Dec 31, 1990 – Nov 30, 2000
- Jul 31, 2003 – Jan 31, 2008
- Sep 30, 2009 – Current *Please note for simplification I did not account for the negative triggers during this time period*
Conversely we have had two major bear markets that the indicator has signaled. Check out the dates below:
- Nov 30, 2000 – Jul 31, 2003
- Jan 31, 2008 – Sep 30, 2009 **Feb 28, 2009: Shiller PE Ratio was under 15**
When I established the exact trigger dates I was able to link them to the historic prices of the C fund. Unfortunately the historic price of the C fund only dates back to January 2003, therefore I was only able to test the system on two bull markets and one bear market. Here are the results I found.
|TSP Performance – C Fund|
|Bull||July 31, 2003 – Jan 31, 2008||$10.30||$15.57||51%|
|Bear||Jan 31, 2008 – Sep 30, 2009||$15.57||$12.46||-20%|
|Bull||Sep 30, 2009 – Current||$12.46||$23.87||91%|
As you can see from our first bull market trigger the indicator returned a 50% gain in 5 years. That’s approximately 10% in annual gains, in my opinion this is a magnificent return on your money for the amount of work it takes to monitor this indicator. During the worst market crash since the great depression our indicator saved us significant losses. At the severe bottom of the crash the share price traded at $8.54 which would have been approximately a 50% loss in value, however the indicators bear market ended with a 20% loss. The most recent trigger occurred in September 2009 which indicated a bull market, we are still currently in this bull market which has returned a 50% gain to date.
During bear market trends the system calls for moving your capital from the C Fund into the G Fund. Just like the C Fund we only have historic prices from the G Fund dating back to early 2003. Therefore we are only able to test the system on two bull markets and one bear market. Here are the results I found.
|TSP Performance – G Fund|
|Bull||July 31, 2003 – Jan 31, 2008||$10.05||$12.32||22%|
|Bear||Jan 31, 2008 – Sep 30, 2009||$12.32||$13.02||5%|
|Bull||Sep 30, 2009 – Current||$13.02||$14.28||9%|
Please remember that the G Fund is invested in short-term U.S. Treasury securities. Payment of principal and interest is guaranteed by the U.S. Government. Therefore we can expect to never lose money in this fund unless the government gets turned upside down. As you can see during both bull and bear markets this fund never decreased in value. This is why I consider it a safe haven during bear markets.
Let’s Put It All Together
I don’t know about you but I’m more of a visual learner. Quite frankly I’m sure some of you could do without all the gibberish of trends, technical triggers, and indicators. You just want to know what to do and when to do it, right? Well if you had $25,000 invested in your TSP as of July 31, 2003 and did not invest another penny here is how much money you would have today using this indicator versus the “buy and hold” strategy.
|Date||Brick By Brick||Buy & Hold|
|July 31, 2003||$25,000||$25,000|
|February 24, 2013||$89,184||$46,650.00|
The numbers speak for themselves clear as day. My system was almost double the investment return versus the traditional “buy & hold” method. Please note that my system calls for us to invest in the C Fund when the Shiller PE is under 15, therefore allocation of capital would have been placed in the C Fund on Feb 29, 2009. Additionally please remember these results were based on if you did not make any other contributions. The portfolio value would have been significantly higher had I incorporated consistent contributions.
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Here’s to our Wealth!