A simple look at recent history will prove the utility of proper fund timing beyond a shadow of a doubt.
Table I shows that a simple buy-and-hold investor in the C Fund, the fund that mimics the S&P 500 index, would have seen his/her TSP stock account fall by 47.5% to 55.5% from the March 2000 high to the October 2002 market low during the burst of the hi-tech bubble.
That bear market would have nearly cut a retirement "nest-egg" in half. In fact, many aggressive TSP investors no doubt witnessed similar erosion in their account's valuations during that period. The sad fact is that any simple, idiot-proof fund timing system such as a 150 day or 200 day moving average, would have moved most of those TSP investors from the stock funds to the bond funds early in that decline. Any investor following such a simple trend following timing system for the C fund would almost certainly have AVOIDED having to sit through the entire 2000-2003 bear market bust.
There is no better example of this principle than can be seen in TSP Pilot's nearly complete elimination of the substantial and severe declines in TSP account values that occurred during that recent devastating bear market of 2000-2003.
While most TSP investors in the historically high returning C fund saw their account values SLASHED by nearly HALF, the TSP Pilot account was actually UP by 15%! Not only would those savvy investors have avoided the devastating 2000-2003 bear market losses in their portfolios, but they would have been invested in the TSP stock funds for most of the previous years of the historic bull market. Those historic pre-2000 profits would have been preserved rather than squandered throughout 2000-2003.
TSP Pilot's gain of 15% during this period was largely the result of a market timing decision to shift from the TSP stock funds to the TSP F bond fund and the G Fund. Thus, TSP Pilot essentially avoided nearly the entire 2000-2003 bear market with an actual period gain of 15% while accepting a limited drawdown (Mdd or risk) of just 27.5%!
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