Sunday Update: 25 September 2016

Sunday Update: 100% G Fund

There are 2 very strong reasons to use the TSP G Fund.

First, the G fund cannot have a negative quarter by statute.  Your money that is allocated to the G fund cannot lose value by law.  Think about that for a second.  With all the different types of market risk out there (Brexit, U.S. Election, Terrorism…), there is NO market risk in the G fund.

Second, the G fund pays a long bond rate with the flexibility of a savings account.  If you go to your local bank and open a savings account, you can move money into and out of that account as much as you like but, the bank pays you virtually no interest for that type of account.  If you buy a long term treasury bond, you get a decent rate of return but you cannot access that money for 10-30 years, depending on the length of the bond.  The G fund gives Federal Employees the best of both worlds, long bond returns with savings account flexibility.

The G fund allows us to manage down side risk.  When the market is in a confirmed down trend or muddle sideways (like we’ve been in for the past 6 months), the G fund provides a risk free albeit small rate of return as we wait for a new up trend to begin.  The “risk” in using the G fund is Opportunity Cost.  The G fund is great for managing downside risk but, when the market is going up you need to be in the stock funds to maximize your TSP account over time.  So, where are we now??…

Short Term

As expected, we had a bit of a rally last week.  The C fund was able to consolidate and pop above the 50DMA but was not able to make new highs.  Friday’s down day pulled the C fund back below the 50DMA.  2190 is the obvious ceiling right now.  We’ll see if you can break thru that ceiling next week or if we roll over to again test the 2120 level.

Long Term

The long term charts haven’t changed much from last week.  The C, S and I funds all appear to be forming new consolidation patterns on the weekly chart.  Additionally, the technical indicators for all 3 stock funds are still trending down.  We probably need one good down week to push these indicators into over sold levels.  We’ll see what happens next week…

I want to be back in the stock funds as badly as anyone BUT, until I see it in the charts, I’m staying in the risk-free, guaranteed return of the G fund.

Have a great week and post questions to comments.

Jerry