Over the past several months, I’ve had a number of new and old subscribers request to see my personal returns, specifically during the market crash of 2007-2008. In this post I’m going to show the actual year end dollar value of my personal TSP account from 2006 thru 2010. To give these numbers some context, I will also show a chart of the S&P500 (C Fund) during that time frame.
Next, I’m going to detail the Alerts we have issued from the end of 2017 thru 6 July 2018. The spreadsheet shows the actual dollar value of the TSP funds over the time frame of each Alert, the date each Alert was issued, and the gains/losses comparing the Alerts to the C fund. The numbers are taken directly from the TSP.gov site. The chart of the C fund during this period gives a great visual of when each Alert was issued.
There are 2 take aways from this post. First, the risk management strategy behind GrowMyThriftSavingsPlan is very effective over time. It allows us to catch the majority of market gains while minimizing downside risk. The goal here is not to “Time the Market”; in fact, it’s just the opposite. The goal is to reallocate AFTER the top or bottom is established. Timing the tops and bottoms is simply impossible. The goal is to identify the critical turning points and reallocate AFTER those turning points are confirmed. This is what allows us to quantify and minimize risk of loss. Second, the risk management strategy enables us to sleep much better at night. By quantifying the risk, you know how much you have at stake. When the market goes into correction/crash, the value of being in the G Fund increases exponentially; both literally and figuratively. As the market moves lower, you feel much better and more secure knowing your retirement funds are safe while you wait for the bottom to be confirmed. The lower the market goes, the faster your account will grow when your money is put back to work following the bottom.
2007-2009 Market Crash Returns
Below are my actual numbers, taken from my TSP statements, at the end of each year. The dollar value is not important. What is important is that the numbers INCREASE each year. Some of this is due to contributions so, take that into consideration. Having said that, I guarantee that my stress level during this market crash was significantly less than those who lived thru this time period utilizing the Buy & Hold strategy. The C fund lost more than 50% of its value from the high in 2007 to the low in 2009. My account increased every year because I was able to identify the major turning points and reallocate accordingly. I did not get all of the gains and I did not avoid all of the losses but, in the end, the strategy proved extremely effective.
Here’s what the C fund chart looked like on a monthly basis over this time frame. Anyone who has been following the Sunday Updates should be able to clearly identify the major turning points on this chart. The market consolidated sideways and formed a double top pattern by the end of 2007. The collapse in January 2008 (on big volume) confirmed the turn. This was the last best time to move to the safety of the G fund. The April 2009 follow thru (on big volume) confirmed the bottom that had occurred in March 2009. This was the best time to put your money back to work in the stock funds.
Everything is easy to see in hindsight. The monthly chart above makes it look easy but, for anyone who lived thru that time period, it was NOT easy. The reality is, we have to make reallocation decisions realtime, based on projections into the future. This is much more difficult than looking backwards.
We have issued 8 Alerts in 2018. All the data is captured in the spreadsheet below. There are 2 important take aways here. First and most obvious, if you followed the Alerts your account would be about 4.5% higher than letting it ride in the C fund, as of 6 July 2018. Second and much more importantly, only one Alert time period showed a loss, 4.36% in January to February. Compare that to losses in 6 out of 8 time periods in the C fund with the biggest loss being 8.8% in January to February. While we did not get all of the gains over all of the time periods, we did avoid the majority of losses over all time periods. Following the Alerts, your retirement savings was much less at risk in the first half of 2018 AND you ended up ahead by 4.5%!
The chart of the C fund below gives you a visual of then the Alerts were issued.
This post was several months in the making, primarily because of the complexity of what goes into the risk management strategy. Most people ask for my returns to do a simple comparison to others returns. While a comparison of returns is important and does matter, it does not tell the complete story. The risk management strategy we use may not get you the highest returns over a specific time frame but, in the long run, this strategy is proven effective while minimizing downside risk.
The risk management strategy is not the only way to play the TSP game. Many will read this post and shrug it off as an attempt to “Time the Market”. Call it what you will. The numbers are there and speak for themselves. If you’re not already a Member of the site, hit the green link on the right side column and Sign Up! For $12 per month or $120 per year, it is a NO BRAINER…