Timing the stock market: Did you predict Monday’s crash?

A highly respected New York-based financial writer predicted Monday’s stock market downturn. He warned readers there are a number of reasons they should be worried about another big correction in the U.S. stock market. His advice was spot on. His timing, not so much. The story appeared in mid-August 2015.

Experts, correctly, have been predicting a major market correction — 10, 20 even 30 percent — since the last one. And based on the history of the market, they are correct. Based on the historical record, we are way overdue.

The problem, for people who try to time the market, is when exactly? How many of us guessed that Monday, Feb. 5, 2018, would hit like it did, when it did?

People who try to buy low and sell high often wind up doing just the opposite. Like during the Great Recession. When stocks dropped dramatically, many Thrift Savings Plan investors got nervous. They moved into the G fund selling their C, S and I shares well below what they paid for them. And they remained in the G fund as the market made its slow but steady climb back. Investors who pulled out of the market had to figure out when/if to go back.

Many people consider the G fund “safe” because it is invested in special U.S. treasuries. But some experts say you can play it too safe. So what is too safe?

Arthur Stein, a Washington area financial planner, says you can have too much in the G fund during retirement. While the G fund balance is increasing, inflation and taxes are reducing the purchasing power.

After the market’s great run in 2017, many people who sought the safety of the G fund have gradually returned to the stock funds. Paying more for shares the later they returned to the upwardly bound market.

At the end of December, 30 percent of the TSP’s investments were in the G fund (Treasury securities); 4 percent in the F fund (bonds); 30 percent in the C fund (the S&P 500); 11 percent in the small cap S fund and 5 percent in the international I fund. The I fund, which had struggled for years, was the big winner in 2017. And it is getting a major facelift that will broaden its investments around the world, which should make it more attractive for investors who want to diversify.

Kim Weaver, director of external affairs for the TSP, was our guest yesterday on our Your Turn radio show. She explained the changes that are coming to the world’s largest 401(k) type plan over the next two years. Including what they new I fund will look like and invest in as well as a new TSP deal for members of the uniformed military who will be eligible for the 5 percent match already available to civilians. To check out what she said, click here.

Nearly Useless Factoid

By Michael O’Connell

On Feb. 8, 1922, President Warren G. Harding introduced the first radio set in the White House.

Source: Wikipedia