TSP TAA Models – April 2014

Recommended TSP Model positions for April, including the new Premium TSP Model, are listed in the table below.

 

TSP TAA Models - Apr 2014

TSP FUNDBASIC TSP
TAA MODEL
ALLOCATION
ENHANCED TSP
TAA MODEL
ALLOCATION
ULTRA SIMPLE TSP
TAA MODEL
ALLOCATION
PREMIUM TSP
TAA MODEL
ALLOCATION
C Fund25%25%25%10%
S Fund25%15%0%10%
I Fund25%15%0%70%
F Fund25%45%75%10%
G Fund0%0%0%

The Basic TSP Model is derived from the classic tactical asset allocation (TAA) model developed by Mebane Faber.  Mr. Faber’s model include five asset cetegories – US stocks, International stocks, commodities, real estate, and bonds. The Thrift Savings Plan has no funds available for commodities and real estate, so my Basic TSP Model is adapted using the funds that are available in the TSP. My Basic TSP Model does use the same timing signals that Mr. Faber’s original model uses.

The Enhanced TSP Model includes additional signals that allow for partial positions in each asset rather than “all in” or “all out” as in the Basic TSP Model. The additional signals are designed to shift some money to the less volatile funds when appropriate and hopefully avoid more of any downturn. As with any mechanical signal, it is right some of the time – not all the time.

The Ultra Simple TSP TAA Model was introduced at the beginning of 2013 and is extremely easy to follow and use without calculators or spreadsheets.  You can read more about it here.

The Premium TSP Model is new for 2014.  You can read more about it here and here.

All of these TSP TAA Models should provide reasonable long term returns with reduced volatility compared to simply buying and holding the C Fund for example.

If you wish to make changes to your TSP account’s fund allocations, remember you have until noon Eastern Time Tuesday to submit your Interfund Transfer request in order for your request to be effective at Tuesday’s market close.  Here is a link to TSP Interfund transfers for your convenience.

Enjoy the rest of your week!

 

Disclaimer: The Boomers’ Beacon Blog and its author are not financial advisers. The Boomers’ Beacon Blog and its author do not offer recommendations or personal investment advice to any specific person for any particular purpose. All TAA Models and articles posted here at The Boomers’ Beacon are for educational and entertainment purposes only. Please consult your own investment adviser and do your own due diligence before making any investment decisions. If you choose to follow one or more of the TAA Models here or any other information presented in this blog for investing purposes, consider dedicating only a portion of your funds to the strategies presented here.  As always, past performance is no guarantee of future performance.

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2 Responses to “TSP TAA Models – April 2014”

  1. Scott says:

    Wondering if you’ve done a recent performance analysis since starting the US TAA? I’ve been using US TAA for about 6 months now.

    • Hi Scott,
      I introduced the Ultra Simple TSP TAA model at the beginning of March of last year. Its first full year (2/28/2013 – 2/28/2014) returned 6.2%, which trailed our benchmark (C Fund, S Fund, I Fund, & F Fund at 25% each re-balanced monthly) and the S&P 500 quite a bit. Our benchmark returned 18.66% during the same period. There were some sizable whipsaw months this past year, which held back the US TSP TAA model.

      The US TSP TAA model will always be affected by whipsaws, but how much is just random chance. Looking back over this past year at the C Fund, it had three down months – Jul & Aug of 2013 and Jan 2014. The following months after each of those down months returned 5.07%, 3.12%, and 4.56%. However, the US TSP TAA model missed those recovery months due to the way it works. Those three follow on months were some really nice months.

      Two of the best advantages of this model are its simplicity and its quick response time to markets that start moving down. The second advantage there could certainly also be viewed as a disadvantage to a different investor. It really depends on the investor. Following this plan will likely save you from almost all significant drops in the markets. However, you will also miss a lot of positive months.

      If you feel like you are being left behind, you could look at the Enhanced model. It probably isn’t obvious from looking, but the Enhanced TPP TAA model is a combination of the Basic model and the US TSP TAA model. Part of it steps out of the market after any losing month. The other part stays in until a moving average signal has it switch to bonds.

      The TSP Premium model also incorporates the “out after a down month” concept, but only for a small percentage of the model’s portfolio. Most of the Premium model’s portfolio follows momentum.

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