Is The I Fund Keeping Pace with EAFE?

The I fund is supposed to mimic the returns of the MSCI EAFE. But how
well has it been achieving that goal? While the TSP is often lauded for
its low administrative fees, you never read about how well the I fund
has done in mimicing the returns of the MSCI EAFE.

In fact, here are the results:

2002
I fund: -15.98%
EAFE: -15.66%

2003
I fund: 37.94%
EAFE: 39.17%

2004
I fund: 20.00%
EAFE: 20.70%

2005
I fund: 13.63%
EAFE: 14.02%

2006
I fund: 26.32%
EAFE: 26.86%

2007
I fund: 11.43%
EAFE: 11.63%

6 YEAR TOTAL
I fund 93.34%
EAFE 96.72%

The TSP offered the I fund beginning in mid-2001. 2002 was its first
full year. From 2002-2007, the I fund returned 3.38% less than the
Index. That is an average of .563% per year. If you work for 40 years
with the Feds, and stay in the I fund, its a 22.52% gap.

Will the new limits on the TSP IFTs help to close this gap?
We will see.....

What Will the Fed Do Today?

Will they lower rates by .25% and say, "enough is enough, for now," as is anticipated, or will they instead do one more huge rate cut...or no rate cut at all?

The markets wait with great anticipation. The dollar has been relatively stable to bullish since mid-March.

My view: Yes, of course the Fed wants to stop lowering rates and bolster the US Dollar, but if you recall, they really weren't anxious to lower rates earlier this year either. Why did they? Because they felt that they had no other choice. They felt that they needed to act and act decisively to avoid a potentially humongous recession. As you may recall, the markets were crumbling like a huge rockslide in the Rockies. Whenever there is stagflation, the Fed generally favors fighting the more problematic issue, and whenever there is an election year, they generally lean more towards fighting recession. Why? In large part because whenever there has been a recession during an election year, the party in power has generally lost. There is a vested interest in fighting a recession. However, when the markets appear to stabilize, there again is an emphasis on fighting inflation, particularly now, when we have double digit inflation rates for energy and food. But the key question is, Can the Fed take a respite from fighting the recession? Will the markets tank without their "Fed fix?" And if they do tank, what comes next? Would Bernanke let the markets fall or would he prepare them for the next infusion of good times?

Stay tuned.

TSP Advisory Services Performance YTD thru 4/25

1. Thrift Trading 4.8% ($279/yr)
2. TSP Wealth 1.5% (free)
3. TSP Max 0.6% ($100/yr)
4. TSP Go HR -(1.8)% (free)
5. TSP Fred -(3.0)% ($162/yr)
6. Maximizing TSP -(5.0)% ($240/yr)
7. TSP Key -(5.9)% ($100/yr)
8. Ebbchart -(12.8)% ($162/yr)

TSP Strategy -(4.2)% (free)
_______________________________________________
The following are not as of 4/25

Matt's TSP Blog 3.8% (thru 3/31) (free)
TSP Wire -(4.5)% (thru 4/5) (free)
TSP Advisor -(4.8)% (thru 3/31)($120/yr)
TSP Report -(11.1)% (thru 4/15) ($100/yr)
________________________________________________
The following do not list YTD returns.

TSP Advisory ($55/yr)
TSP Pilot ($150/yr)

TSP Advisory Services Returns for 2005-2007 are in the files
of the TSP Strategy Forum.

TSP Equities Leading Steadily Over Three Months

YTD: F fund 1.3%, G fund 1.1%, C/I fund -4.2%, S fund -4.3%,

4 years: I fund 77.2%, S fund 43.2%, C fund 32.2%, F fund 20.7%, G fund 19.8%
3 years: I fund 55.1%, S fund 35.5%, C fund 27.4%, F fund 15.2%, G fund 14.7%
2 years:I fund 18.5%, F fund 14.3%, C fund 11.7%, G fund 9.7%, S fund 5.9%
1 year: F fund 6.3%, G fund 4.5%, I fund -2.0%, C fund -4.6%, S fund -8.3%,
6 mo: F fund 2.9%, G fund 2%, I fund -6.4%, C fund -6.7%, S fund -7.9%,
3 mo: I fund 6.9%, S fund 6.0%, C fund 5.6%, G fund 0.9%, F fund -0.7%
2 mo: I fund 4.2%, C fund 2.2%, S fund 1.1%, F fund 1.0%, G fund 0.6%
1 mo: I fund 6.1%, S fund 4%, C fund 3.5%, G fund 0.3%, F fund -0.7%
2 wk: C fund 4.9%, S fund 4.5%, I fund 3.9%, G fund 0.2%, F fund -1.2%,
1 wk: C/S fund 0.5%, G fund 0.1%, I fund 0%, F fund -0.2%

While equities are down YTD, they have been leading strongly over the past three months.

Are TSP Advisory Services Worthwhile?

That's an individual decision. Should you keep your money in an L fund or try a different allocation? Are pay services valuable? Do you get more of a return from an expensive pay service than a free one? That's what we've been tracking over the past few years, and hope to continue to follow in the future. These are the 3, 2 and 1 year returns thru Dec 2007. We track these and other services on a weekly basis on the forum, for free. We also track the allocations of our members on a monthly basis, for free.

TSP Advisory Services Performance
Three Year : 2005 - 2007

1. Thrift Trading 53.9%
2. TSP Advisory 47.3%
3. TSP GO High Risk 46.3%
4. TSP Key 41.8%
5. TSP Report 36.4%
6. TSP Wealth 27.8%
7. TSP Max 23.4%
8. TSP Pilot 22.4%
9. TSP Talk -(0.5)%

TSP Strategy 59.9%

TSP Advisory Services Performance
Two Year: 2006-2007

1. TSP Advisory 31.0%
2. TSP Go High Risk 29.3%
3. Thrift Trading 26.3%
4. TSP Report 27.5%
5. TSP Key 22.2%
6. TSP Talk Shark 16.8% (from 2/1/06)
7. TSP Pilot 15.3%
8. TSP Advisor 13.5%
9. TSP Max 9.8%
10. TSP Wealth 9.1%
11. TSP Talk -(0.9)%

TSP Strategy 40.7%


TSP Advisory Services Performance
One Year - 2007

1. Matt's TSP Blog 18.3%
2. TSP GO High Risk 11.6%
3. Thrift Trading 9.0%
4. TSP Advisory 9.0%
5. TSP Advisor 7.7%
6. TSP Talk Fred 5.7%
7. TSP Talk Shark 5.3%
8. TSP Pilot 4.2%
9. TSP Report 2.1%
10. TSP Wire 0.2%
11. TSP Wealth -2.0%
12. TSP Key -5%
13. TSP Max -5.3%
14. TSP Talk Ebbchart -5.8% (from 10/1)
15. TSP Talk -7.5%
16. Maximizing TSP -12.2% (From 6/24)

TSP Strategy 11.4%

Final IFT Rule Effective May 1, 2008

The FRTIB posted their proposed rule on trading curbs on March 10th. The final rule was issued today, effective May 1. In effect, despite 290 comments opposed and only 31 comments in favor, the FRTIB moved ahead with their proposal, without change. Clearly, their "mind" was made up last year and the negative comments had no effect other than to have the FRTIB defend their position more vociferously. Changes can now be made only through the legislative process. Do YOU agree with this new trading rule?

IFT Restrictions Will Not Stand!

The FRTIB's proposal to restrict interfund transfers would result in a more than 90% limitation from the previous policy. IMHO, it is simply too sudden and drastic a restriction for many participants. Will there be some restriction from the previous policy when all is said and done? It seems clear that the answer is YES. There are too many logical reasons to either charge for excessive transfers or not permit them at all. The question is, in light of the previous policy that permitted daily transfers, what form and extent of a restriction would be deemed fair and appropriate? I've stated that, rather than moving to 2 permitted transfers per month, that the TSP should consider instead the concept of permitting 24 transfers per year. It would incorporate the same limitations, only on a yearly basis, allowing participants additional flexibility with respect to when they wish to utilize their transfers. What do YOU think?

Equities Have Been Moving On Up!

For those who think that this year has been a gloomy one for the equity markets, the fact is that, while much of January was down hard, over the past 3 months, you would have done better investing in the equities than in the F or G funds. (See chart below) The question is, will this bullish trend continue?

4 years: I fund 78.5%, S fund 44%, C fund 33.1%, F fund 21.3%, G fund 19.8%
3 years: I fund 55.5%, S fund 29.5%, C fund 26.8%, F fund 16%, G fund 14.7%
2 years:I fund 18.5%, F fund 14.8%, C fund 10.1%, G fund 9.6%, S fund 4.4%
1 year: F fund 7.1%, G fund 4.5%, I fund -2.1%, C fund -4.6%, S fund -6.8%,
6 mo: F fund 3.8%, G fund 2%, I fund -5.5%, C fund -6.5%, S fund -7.7%,
3 mo: S fund 7.7%, I/C fund 5.3%, G fund 0.9%, F fund 0.1%
2 mo: I fund 6.8%, C fund 3.7%, S fund 2.6%, F fund 0.9%, G fund 0.6%
1 mo: I fund 9.4%, S fund 6.7%, C fund 4.5%, G fund 0.2%, F fund -0.7%
2 wk: C fund 1.2%, S fund 0.9%, I fund 0.6%, G fund 0.1%, F fund -0.3%,
1 wk: C fund 4.5%, S/I fund 4%, G fund 0.1%, F fund -0.6%

Welcome!

In this blog, I'll be providing my views with respect to the state of the markets as they are affecting the Federal Thrift Savings Plan. I'll also be discussing the actions of the FRTIB (Federal Retirement Thrift Investment Board) and how they are affecting the TSP. Finally, I'll discuss the performance of the public TSP advisory services that are currently available, both pay and free, in an effort to assist Federal employees in deciding whether the L funds are really the way to go or whether there is a better way.

If you wish to comment on a post, please visit the TSP Strategy Forum (see link at right)
and express your opinion there. In that way, all members of the Forum, now numbering over 1,000, will be able to read your comments, and respond as well.