The dynamic, actively managed TSP Pilot Portfolios maximize the returns in your TSP account by extensively optimizing the interface between two complimentary investment principles of fund timing and fund selection.
Fund Timing, for TSP investors, is defined simply as choosing the most appropriate times to be invested in a TSP stock fund. TSP Pilot targets its attention to the stock funds (C, S and I) rather than the bond funds (F and G) since the important returns over time are almost always to be had in the stock funds. Also, and the stock funds usually are somewhat more amenable to timing algorithms than are the bond funds.
When properly executed, fund timing, or more generally, market timing, can be perhaps the most powerful tool a TSP investor can wield in his quest to maximize his Thrift Savings Plan returns. The chief advantage of effective fund timing is the protection it would provide a TSP investor from the most devastating of bear markets. Remember if your portfolio falls by 50% in a bear market you must then double your money just to get back to break even!
Most amateur fund timers lose money in their TSP accounts because they fail to properly follow disciplined, logical, back tested and objective fund timing systems. Even some professionals lose. In fact most investors switch in and out of the stock and bond funds at precisely the WRONG times because their switching decisions are generally unstructured and flawed by knee-jerk emotional reactions. Unfortunately, this reality has given professional market timers an undeserved black eye.
In the hindsight of historical markets many TSP Pilot fund allocation recommendations may look like miss hits. That's because TSP Pilot recommendations never buy bottoms or sell tops. What TSP Pilot does, and does well, is to define and determine market trends for the funds offered in the TSP program. By definition a trend can never start at a market bottom or at a market top. There must always be some leading price action to indicate a trend reversal before a trend change can be flashed.
Almost any objective approach to fund timing would be far superior to moving in and out of funds in an unorganized, emotionally based series of decisions that in hindsight almost always look absurd. Unfortunately, most TSP investors inadvertently follow that approach. A simple buy-and-hold policy would almost always outperform any unorganized and subjective attempt to jump between funds when emotions are the prevailing motivators.
TSP Pilot makes effective fund timing practical for the average TSP investor by providing a clear, objective and quantitatively derived series of recommendations for specific TSP fund allocations. All the TSP investor need do is to summon up the simple courage to follow TSP Pilot's clearly defined fund allocation recommendations to maximize her returns.
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