Sunday Update 10 January 2016

100% G Fund Until Further Notice (*See bottom of post)
Here are some descriptors for week #1 of 2016:

  • “Stock Market Puts In It’s Worst Opening Week Ever” – WSJ
  • “Stocks close out week with worst start to year ever” – USAToday

So what does this mean for us going forward into 2016?

  • “And there could be more turbulence ahead as history indicates that the trading in the first week of a new year could influence the direction of the market for the remaining 51 weeks. For the S&P 500—the first 5 trading day of the new year has predicted the direction of the full year 68% of the time,” according to the WSJ Market Data Group.

I put this out there only to manage expectations. 2016 is going to be a tough year for the market but this does NOT mean it will be a bad year for TSP investors (depending on how you invest).

We moved to 100% G fund in mid December. The G is a great place to be when the market is tanking. It enables you to sleep soundly at night knowing that your retirement funds are exposed to 0 (Zero) risk by law. The second half of the equation is getting back into the stock funds near a market bottom so we can grow those funds in 2016.

Ideally, what we are looking for to get back into the stock funds is some kind of bottoming pattern AND a breakout to the upside. Without the breakout to the upside, the risk increases. If you want to play it safe, wait for an upside breakout. If you’re ok with some risk then here’s one option:

You can see in the C fund chart below that the market is very close to visiting the lows from last August. We are now at 1922 or about 3% above the August low of 1867. Based on the double bottom pattern from last August/September, that price area should act as a floor for us. Add to that, the market is very oversold in the short term and you have a great set up for a big bounce next week.

IF you’re up for some managed risk, here’s what I’d do: 50% C fund / 50% G fund. I would expect that we will see some stability between 1900 and 1865 so your risk is less than 3%.

Post questions to comments and SHARE. Thanks!
Have a great week!



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