This post is an update to Getting In Sync from March 2020. You definitely want to go back and read it!
This is a question we hear several times every week. “I’m so happy to have found this TSP group! I understand what you guys are doing and it makes a lot of sense. I want to follow along with your allocations but, how do I start? Should I just switch to your Current Allocations? I want to get in sync!”.
This seems like a very simple question… In addition to your personal circumstances and risk tolerance, here are some things to consider:
- Current Market Conditions
- The 2 IFT per Month Rule
- Buying on a Green Day / Selling on a Red Day
Current Market Condition
Is the market over extended? Has the C fund moved higher for the past 8-10 consecutive days? What is the direction of the overall trend? Should we expect a pull back anytime soon?
When the market is over extended within an established up trend, pull backs are a healthy part of the process. When the market pulls back to a support level or moving average line, it provides us with an opportunity to reallocate into the stock funds with a reduced level of risk. If we reallocate into the stock funds when the market is over extended, we run the risk of a pull back and an increased level of risk.
The 2 IFT Per Month Rule
Each calendar month TSP participants have two opportunities to reallocate between any of the 5 core TSP funds and the L funds. Reallocating between the funds is accomplished by requesting an Inter-fund Transfer (IFT) at TSP.gov. Any subsequent IFT in that calendar month can only increase your position in the G fund.
Understanding this rule, and how to apply it, are critically important in managing your TSP account in general; and even more so when trying to get in sync with GrowMyTSP.com allocations. If you use your two IFTs early in the month, you cannot increase your position in the stock funds again until the beginning of the next calendar month.
Buying on a Green Day / Selling on a Red Day
Many TSP investors believe that you should never reallocate into the stock funds on a Green Day (a day when price moves higher). They believe that, to buy on a green day is to buy when the market is high. Conversely, many TSP investors believe that you should never reallocate to the G fund on a Red Day (a day when price moves lower). They believe that, to sell on a red day is to “lock in losses”.
While this may make intuitive sense, there are 2 major flaws with this thinking. First, an IFT request must be made by noon East Coast Time to get executed at that day’s closing price. There is no way to know if the day will close Red or Green before making your IFT request. Second, TSP is not a “day trading” platform. It is designed to build wealth over time. Price action on the specific day that you request an IFT should be inconsequential in the bigger picture of your TSP account management.
If you want to get in sync with our Allocations, you have 2 choices.
First, assuming you have an IFT available in the calendar month, you can simply make your IFT request to match our current allocations. If you get in sync when the market is over extended, your short term risk is relatively high.
Second, you could wait for a pull back in the market and get in sync at that time. This would decrease your short term risk BUT, there is no guarantee how long you will wait to get a pull back.
It comes down to making reallocation decisions in line with your personal risk tolerance.
The 6 month daily chart of the S&P500 (C Fund) below shows our reallocation changes during September and October 2021. Following a long term up-trend, we gradually managed downside risk in September by making 2 IFT requests. When price bottomed and turned higher in October, we made 2 IFT requests and captured the majority of the October gains.
This is how we maximize gains and minimize downside risk.
The At GrowMyTSP.com, we make reallocation decisions based on Technical Analysis of price movement of the TSP funds. We DO NOT have a crystal ball. We do not attempt to time the tops and bottoms of the market. What we do is respond to what the market tells us to do. Our goal is to maximize gains while the market is moving higher and minimize downside risk when the market is moving down.
If you are a subscriber to GrowMyTSP.com, you have access to the Member Dashboard. On this dashboard, we post our Current Allocations and Alert Analysis that fully detail why we made each specific reallocation decision. When reallocation decisions are made, GrowMyTSP.com will post the new Allocation to the dashboard and send an Alert to subscribers, BEFORE we execute the new Allocation within our personal TSP accounts. To be clear, GrowMyTSP.com DOES NOT provide individual financial advice. Subscribers are encouraged to read our Alert Analysis and make their own reallocation decisions based on their personal circumstances and risk tolerance. GrowMyTSP.com is NOT a Registered Investment Advisor (RIA) or a Certified Financial Planning (CFP) firm. We are an education company, assisting Federal Government and Military Service Members in actively managing their TSP accounts.