TSP Pilot's ETFs Program

(This free service has now been put on hold and will be released as part of one of our sister services coming soon.)

A FREE feature from TSP Pilot, along with our Fidelity Selects Program, newly provided to current subscribers of record, is an optimized investment program designed for other investment funds that subscribers may have outside the Thrift Savings Plan in personal investment accounts.

The ETFs Program is best used in conjunction with our Fidelity Selects Program by splitting the commitment of your non-TSP funds approximately equally between the two Programs to diversify and reduce market risk exposure. (See Table XV).

This Program is the result of many requests received from subscribers for a similar series of professional, quantitative and technically based fund timing and fund selection systems (see main menu bar links above for more info) for investment accounts subscribers may have outside the TSP plan.

TSP Pilot's "ETFs Program" is another custom designed, turn-key investment plan specifically targeting the relatively new world of exchange traded funds (ETFs) These baskets of securities, or index-fund clones, are now targeting a significant variety of U.S. and international funds, indexes and market sectors. You can find a full explanation of exchange traded funds on Yahoo! Finance and a complete listing of currently available ETFs on MSN.

ETFs are essentially securities that trade like stocks while providing the diversification of complete funds and indexes. While a small transaction fee is usually charged, the all-in costs for ETFs are usually only half those of no-load funds.

Unfortunately, a recent trend in the mutual fund industry has been to charge increasingly exorbitant back-end or "early" redemption fees to discourage "frequent" fund switching. The benefit of ETFs is that they don't carry the early redemption penalties and other trading restrictions increasingly being placed on most mutual funds to create trading disincentives.

You can buy and sell them (even short them) as you would any stock at any brokerage firm. They carry no "loads" or sales charges and usually only minimal brokerage commissions--and in some cases no commissions at all.

ETFs are a rapidly growing investment medium and number more than 1200 worldwide as of mid 2011. As of December 2011 ETF assets topped $1.4 trillion in the U.S. alone and are growing far faster than traditional mutual funds.

Some of the newer, more specialized ETFs, are rather thinly traded sometimes causing some rather "strange" executions when placing intraday market or limit orders. However, the TSP Pilot ETF Program assumes that our recommended trades are placed only on the following day's close as is true for our TSP fund recommendations. Deferring action until the day's trading close assures that there will be sufficient volume to accommodate all orders placed in the ETFs tracked by the Program.

This policy opens a much wider selection of ETFs to choose from and reduces the volatility impact significantly. While orders placed at the open or intraday after receiving a trading recommendation "may" improve returns slightly, all TSP Pilot historical performance numbers assume "on close only" executions.

The fund timing and fund selection methodology for the ETFs Program is very similar to that used to guide investments in the TSP funds within the standard TSP Pilot Program for the Thrift Savings Plan. As is true for the TSP Pilot Fidelity Selects Program, the projected historical results for the ETFs Program are superior to those for the TSP Pilot Standard Portfolio, in both risk and reward, for the simple reason that the ETFs Program provides a significantly wider selection of available funds/sectors from which to choose the optimal portfolio mix at any point in time.

Historical back tested returns for the ETFs Program have also provided a better adjusted performance, based on typical risk/reward ratios, than many of the broad market index funds.

TSP Pilot has absolutely NO relationship with any brokerage company and is not remunerated by them in any way, directly or indirectly, nor is the TSP Pilot ETFs Program an independent revenue producer for TSP Pilot. The ETFs Program was chosen as an investment alternative purely based on cost and performance considerations.

While TSP Pilot's ETFs Program is currently provided as a free additional service to regular TSP Pilot subscribers, at some point in the next several years, TSP Pilot may begin to charge for its ETFs Program separately for new subscribers.


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