While it can be seen from Table IV that TSP Pilot's annualized performance for the Standard Portfolio was about the same as that for the TSP C and S Funds over the past 28 years, The Standard Portfolio took ~74% LESS MARKET RISK for that same return!
While not every year was as successful ('91, '93, '94, '08), the market risk of the TSP Pilot Portfolio was almost always dramatically less than that for any of the individual TSP stock funds across the entire history.
In fact while the TSP C Fund was some 25% LOWER at the end of 2009 than it was at its peak in October of 2007, the TSP Pilot Standard Portfolio was actually net HIGHER by over 6% in the same period!
Not only had the Pilot Portfolio GAINED in value during that period, but the total net account drawdown of the Pilot portfolio was only 1.3% during the period while the C Fund lost nearly 55%! Translation...during a very difficult period in the stock market, the Pilot Portfolio had a much greater return while having assumed much less market risk.
Recent performance numbers for both the Standard and Aggressive portfolios easily demonstrate the dramatic superiority of the TSP Pilot Portfolios in their control of market risk and account exposure to downside volatility. While gross returns were about the same as the dedicated TSP equity funds, market risk was nearly non-existent in the Pilot Portfolios. This lowered market risk is the essential goal of all retirement plan holders. Since you experience LESS downside market risk, you are more willing to keep your account IN THE MARKET thus avoiding premature panic liquidations.
In fact TSP Pilot subscribers took 64% to 70% LESS MARKET RISK during recent years than did the TSP funds. That's no small feat! In fact the volatile market years of 2014 and 2015 saw subscriber accounts vary by only about 2% in value from any high value to any following low value!
Taking superior control over market risk and exposure is where the TSP Pilot "cuts its teeth" and earns its credentials. High year-end returns are useless if investors panic after multiple market losses and prematurely move to cash. Low TSP Pilot account volatility keeps investors comfortable sleeping at night and remaining "in the market" long after others have "thrown in the towel".
Again, It is important to note that the significantly reduced market exposure risk experienced by subscribers as a result of following the TSP Pilot Portfolio recommendations permitted greater investor "staying power" during the recent extraordinarily high market volatility materially contributing to better net results.
How? The reduced market risk and exposure of the Pilot Portfolios helped to keep investors continuously committed to their diversified portfolios thereby reducing the costly "knee-jerk" emotional reactions many investors would normally have experienced from "throwing-in-the-towel" and selling their TSP stock funds after the frequent and sharp market sell-offs of recent years--selling out precisely at the wrong times. This fact is a truly key one in the successful management of Pilot's TSP accounts.
In fact, historically, on a risk adjusted basis the TSP Pilot Standard Portfolio performed extremely well throughout as it accepted less than half the exposure to downside market risk of any of the TSP Funds--including the new L Funds. Remember that the main thrust of TSP Pilot is to optimize investor returns while minimizing downside exposure for each given level of risk by using a balanced portfolio of the available funds in the Plan.
For typical investors in 401k retirement plans risk and volatility are often mortal enemies of successful returns. If market risk is not controlled and managed effectively any positive returns may be quickly turned into major account losses when markets suddenly reverse. In fact, historically, most 401k investors sell or pull out of their plan's stock positions (including the L Funds) when markets turn dramatically against them. Invariably they sell when the pain level of the decline is at its greatest--and always...always at the wrong time. The TSP Pilot's diversified Portfolios have always reduced that volatility "pain level" keeping TSP investors consistently on their long term paths to successful results.
For preservation of returns retirement portfolios need to be professionally optimized for the absolute lowest risk level possible to assure continuity of performance.
While a focus on long-term performance is important for all investors, it is mandatory for 401k account (TSP) investors. For them chasing short-term performance, or selling under the emotional stress of losses, is always counter productive. For such investors patience is always rewarded and impatience punished by a loss of hard-earned retirement funds.
While our high historical returns are obviously important, perhaps the major advantage of TSP Pilot is that it insures your peace of mind during those terrible long term down markets that always occur. TSP Pilot substantially insulates your TSP account from the devastating market losses that wipe out years of profitable contributions to hard-earned retirement accounts.
By keeping TSP stock fund positions at moderate levels even sharp and sudden corrections are easier to handle emotionally. The key is to be sufficiently comfortable with your portfolio levels that you aren't tempted to liquidate during sharp declines. Such emotionally prompted TSP account stock fund liquidations are almost always loss producing and ill-timed.
Following TSP Pilot is easy. We send you email notices to alert you every time a new recommendation is posted to our password protected Current Advisory Page. That page always lists the specific funds, balances and allocations that our systems have currently developed. Advisory recommendations are carried for all of the TSP funds including the new L Funds.
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