Managing Risk to Maximize Returns

GrowMyThriftSavingsPlan.com is primarily an EDUCATIONAL service.  The goal of the site, Sunday Update, FaceBook Page, and FaceBook Group, is to educate Federal Employees/Retirees and Military Service Members/Retirees in using Technical Analysis to manage market risk and maximize returns in your TSP account.  We are all going to retire someday and as the Defined Benefit portion of FERS is being diminished, TSP will be a much more significant portion of your nest egg.  Playing an active roll in the growth of your TSP is critical to maximizing your retirement account over time.  There are many ways to play the TSP game.  GrowMyThriftSavingsPlan.com focuses on Technical Analysis as the primary tool.    

The site DOES NOT provide individual financial advice.  Everyone’s life circumstances and personal appetite for risk is different.    The beauty of utilizing Technical Analysis to make TSP management decisions is objectivity.  Technical Analysis takes out subjectivity, defines the risk, and provides options for moving forward based on actual price movement.  Let’s look at an example.  ILLUSTRATION ONLY

The chart below shows the S&P500 (C Fund) at 11:34AM today.  We have seen several days of support at the 200DMA.  If you could buy the C fund now at 2630, you would expect it to rise initially to the 50DMA at 2729.  That would be an initial gain of 3.7%.  If the market continued higher thru the 50DMA then you would have bought as close to the bottom as possible and maximized your gains.  But, what if the market goes down?  When would you sell the S&P500 if the market went against you and what would be your risk?  Let’s say you decide to sell if the market closes below the 200DMA, at 2575.  If you bought at 2630 and sold at 2575, your loss would be 2.1%.  This is the amount of risk in this transaction.    

This is a current example of utilizing Technical Analysis and simple math to determine the Market risk of a potential reallocation within your TSP account.  To manage the risk even further, you could allocate 25% or 50% from the G fund to the C fund until the price direction is confirmed.  You don’t need to put all of your eggs in one basket.  

In TSP, we must submit the reallocation request by noon to get that day’s closing price.  That means making decisions based on daily or weekly closing prices versus intraday prices.  Also, the 2 moves per month rule adds a level of complexity.  Having said that, the method for determining market risk is the same.  

In this example we identified the buy point and potential gain, the sell point and potential loss, as well as the downside risk.  We removed the subjectivity and fear associated with moving money within TSP by capping the potential loss.  You can practice this yourself without making actual TSP allocation changes.  The more you practice, the more control you will have over your TSP account and ultimate retirement destiny.  Good luck!  

—————–

This was a simple example of some of the tools and methods I use in managing my personal TSP account.  What have I done since the highs in January to manage risk and maximize gains?  Below are my most recent reallocations.  

• 1/29 reallocation from 34%C/33%S/33%I to 50%G/50%C
• 2/09 reallocation from 50%G/50%C to 34%C/33%S/33%I
• 2/21 reallocation from 34%C/33%S/33%I to 75%G/25%C

If you want to know when I make a move in my personal TSP account BEFORE I do it, become a Member of the site.  At $12 per month or $120 per year, consider it a very affordable insurance policy against big losses in your retirement nest egg!