TSP Market Timing Alert

Most financial experts (including Warren Buffett and John Bogel) say you can’t time the market.

That is, having the ability/luck to routinely guess when stocks have hit their peak or bottomed out.

That’s why most recommend that long-term investors (such as most folks in the TSP and other 401(k) plans) diversify their investments, occasionally rebalance their portfolios and stay the course.

Be that as it may, thousands of feds and private sector investors are moving out of sagging stock funds into safer havens, like the TSP’s G fund.

Many intend to return to the market when it goes up.

After the stock fund shares rise in value.

But it hit me the other day that it is possible to time the market.

My system, like most brilliant ideas (from the discovery of the theory of gravity to the development of Saran Wrap) is very simple.

Easy as looking over your shoulder.

In fact, that’s the secret.

Using this system, here is my advice for when you should bail out of the TSP’s stock funds and move into stable investments like the G fund.

Question: When should you/me/we get out of the stock market?

Answer: A year ago yesterday.

Told you it was simple.

Had you heeded that advice, you would have sold high (when many stocks were at their top price) and bought the maximum number of shares/units of the super-safe G fund.

According to news reports, the Dow-Jones Industrial Average hit its record-high on October 7, 2007. It hit 14,164.53 one year ago this week.

But that was then…

One year later, Monday of this week, closed below the 10,000 mark for the first time in four years.

Yesterday it stood at 8,579.19, closing below 9,000 for the first time since 2003.

Financial planner John Bernards was the guest this week on WFED’s Your Turn radio show.

(I host, with producer Julia Ziegler, every Wednesday at 10 a.m. EDT.)

Bernards said:

Timing the market is very difficult thing that no financial planner would advise. Too often, investors will sell at lows with all intentions of getting back in only to find that once they are comfortable with stocks, all the great values are gone — and they buy in at higher highs.

Missing the 30, 20 and even 10 best performing days of the stock market, over a 10 year period, could have a negative effect on your long term return.

In short, if you are in for the long run:

1. take a deep breath
2. review your investments and asset allocation
3. continue to buy into down markets
4. prepare mentally for what could be the best financial decision you have ever made.

To hear the complete interview click here.

Anyhow, I checked my records and indeed I did write a column on Oct. 6, 2007 advising people that the market at that point had nowhere to go but down.

That they should bailout pronto.

But it never ran.

What happened, as I recall, is that the column was finished and I was in the process of editing a print copy. I went out to lunch and someone in the office opened a window. The column blew away. When I came back the column was gone and the computers had crashed wiping away all my good work. It was the perfect storm. Our deadline was fast approaching and in my haste, I chose another subject. Probably pay for performance or some such.

But for the open window, and then the computer crash, the market-timing alert would have been issued. And we would all be sitting pretty (or at least prettier) today.

At least this is proof positive that it is possible to time the market. Just that’s it’s a whole lot easier after the fact.

For a good then vs. now recap, click here.

Meantime, sorry about the late thing!

NFFE Elections

Richard N. Brown has been reelected for a 4th term as president of the National Federation of Federal Employees.

National Secretary/Treasurer William Dougan, who was unopposed, was reelected for a second term.

The AFL-CIO affiliate says it represents 100,000 feds.

The elections took place at its 48th national convention in Milwaukee.

Colin Walle, John Obst, Joe Drozdowski, Patricia La Sala, Kolleen McGrath, Tim Ostrowski and Debbie Ransom were elected or reelecated as national vice presidents.

Nearly Useless Factoid

Which sounds better:

Caramel ribbon, chocolate pieces, candy red states and crunchy mixed nuts swirled into White Chocolate ice cream,

or

Peanut-Nougat ice cream whirled with chunks of chocolate-covered peanut brittle and a caramel ribbon.

Welcome to Decision ’08, Baskin Robbins-style: Straight Talk Crunch or Whirl of Change? Yeah, there’s an ice cream for that.

To reach me: mcausey@federalnewsradio.com

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