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Since ETFs are a new investment medium, the historical database is relatively short (data by www.FastTrack.net). Table XIII below shows the researched results based on back testing from 7/13/2000 through 6/30/2005 for the current TSP Pilot ETFs Program.
The historical performance since the beginning of the database of 29% per year annualized has been based on extensive backtesting and parametric optimization techniques, the performance numbers have not been curve fitted and are based on relatively simple fund timing systems with a considerable number of degrees of statistical freedom to enhance future reliability and viability in real time trading.
A conservative projection of future returns may take 10 percentage points off the average annual return shown below which still leaves a VERY respectable average return around 15%/year. The comparison performance numbers speak for themselves.
Underscoring the benefit of following BOTH the FidSel and ETF's Programs concurrently, Table XV displays the comparative performance of the FidSel and ETFs Programs followed separately and together. If you split your money between these two Programs your risk/return ratio is increased dramatically.
For example the UPI (which measures the amount of return per unit of risk accepted) was 9.1 for the combined account vs. around 7.5 for either of the two Programs followed separately. This represents a dramatic increase in performance when following the two Programs combined.
That performance increase came from a substantial reduction in market risk when both Programs were followed concurrently. This is a remarkable example of how diversification can improve total performance. Obviously, following both the FidSel and ETFs Programs concurrently, with a split commitment to each, would be the most effective way to optimize your non-TSP funds with TSP Pilot.
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