Customer Q&A

I'm not a huge fan of back testing my program. First, there is some subjective decision-making that goes into my allocation decisions and you can't back test human decisions once information is known. Second, the mutual fund industry is a bit difficult to back test as they often bring on new funds every year, suspend contributions, or even cancel entire funds. I will have to change the mutual funds on My Funds Coach when they make these changes. I don't see this being a near-term problem but it does prevent back testing.

What is on My Funds Coach are actual decisions I made last year. I have not placed the monthly returns but it should be calculate them based on my allocation percentage. I might add this feature in the future.

I'm not familiar with the 60 day lock in rule with Fidelity. I am aware of and designed my system to avoid the 30 day rule to prevent roundtrip penalties.

Yes, in some cases some of the mutual funds have corresponding ETFs, especially Vanguard. Their website will tell you which funds have them. I plan on adding more to the info section on the main page in the coming months to detail this info.

I'm very happy to hear of the crossover benefit to other Federal employees and military service members. As to fees between the two, the mutual fund companies make quite a mess of their different funds. Between minimums, closing and opening funds, capital gains tax, and fees it can be difficult to choose the right mutual funds. Many people are enrolled in one fund company or another based on their employer's 401k management company. With Vanguard, you also have different levels of the same mutual fund, which they call Admiral. These funds have pretty low expense ratios compared to other mutual funds but require a minimum investment. One might find that they remain invested at the minimum level in all the mutual funds I am tracking to maintain that initial investment and then move any investments above that threshold around between the other funds (this is what I do with Vanguard to prevent from being locked out of a "closed to new investors fund"). I can't recommend one over the other, but in many cases it really is just who you are more comfortable investing with. I can imagine many of my subscribers are USAA members (military affiliation), and while their returns this year lagged both Vanguard and Fidelity, people are comfortable with the company they know. As good site to research fees and expense ratios is https://www.morningstar.com/ You can get a very quick understanding of the basic expense ratios and minimum investments across all the funds.

I don't believe snap moves like that are helpful to my subscribers as it requires them to monitor and have access to their accounts every day, not to mention the requirement to enter a change before noon on EST. Also, I never put my money in the G Fund as the real inflation rates are always above the G Fund returns, essentially guaranteeing a loss.

My percentages cover both new contributions and interfund transfers.

My allocations are for an entire month. Moving investments based on how the market is doing in mutual funds next to impossible to do successfully since you have to have the trade order in by noon for it to take effect at the end of the day. During those 3 hours, the market can swing wildly.

I have many TSP and MFC participants who are close to or are in retirement (but not at the mandatory withdrawal phase) and I get asked this a lot. I can't give you advice as risk tolerance is very personal, but many of my subscribers set aside the portion of their investments they do not want to take risk on and invest the other portion using my allocation.

We do not offer different levels based on risk. Risk is a very specific metric and therefore it has to be tailored by the individual investor. My system seeks to generate the highest returns with the lowest level of risk.

I do get your question quite often, and I can only tell you that for short-term expenditures, I set aside that money in a low interest/low risk account because I know I cannot afford to lose the principal. However, for longer-term investments, I seek to generate the best returns with the lowest risk. At times, my investments may seem highly aggressive, but in the long-term the risk and my calculations make it less aggressive than putting all my investments in the stock funds in perpetuity.

My philosophy is pretty simple- trade for the long-term, make informed position changes, and make the trading windows predictable. MFC investors are not day trading with their accounts, and many are in the military and don't have the luxury of responding looking for an email showing them I have conducted a position change. Additionally, trying to time the market with a mutual fund is incredibly difficult as trades do not take effect until the end of the day.

As for waiting for the optimum time to change, I wish I had a crystal ball, but most of my investment decisions are more macro-based than on individual days. In the event of a market collapse, I would be more likely to remain in the positions that I am in as crashes tend to overcorrect and there will be correction to the overcorrection. For slow declines and troubling economic issues, that is when I move out of my more aggressive positions.

As always, my subscribers have varying levels of risk tolerance and may always keep a portion of their investments in a low-risk position.

I can agree with your active approach to investing in the TSP. Most of the people I speak to do not actively manage it. They are either all C Fund or a Lifecycle fund, which can be worse since it is just a ratio of the funds and not driven by any real investment methodology that I can follow other than the basic mantra of "diversification".

I do not invest in the G Fund simply because it will always result in a loss when compared to real inflation. When I have extremely low confidence in the stock market, I move my money into the F Fund. Yes, the F Fund can and has been negative, but it is not guaranteed to be negative like the G Fund.

I anticipate continuing this service indefinitely and have continuity plans in place for any unforeseeable disruptions.

My investment strategy does not take into account person's retirement age. What I offer is a way to see how I invest my TSP every month. Risk is really a personal decision and investment advisors use many different methods to judge someone's appetite for risk, beyond just their retirement age.

The Lifecycle funds attempt to do this risk reduction for TSP investors but their returns have been consistently less than mine, simply because they tend to always invest in every fund, including the G Fund, which generates returns less than inflation.

I can't give you advice as I am not your investment advisor, but for me, TSP is part of my overall retirement strategy. I keep all of my TSP in the C, S, or I Funds with a very rare dip into the F Fund once every 2 or 3 years. I also have a 401k, savings, and military retirement some years in the future. As a result I am able to take an all in approach to the TSP as I have other investments (savings and retirement) that are negligible in risk. The TSP (and my 401k) are my only ways to maximize my retirement and take risk with the benefit of proportional returns.