Recently FedSmith’s John Grobe posted a list of ‘TSP Allocation Services’ offering advice (at a subscription fee) for TSP participants. This includes the TSP’s own L Funds plus 3rd party allocation service providers. Among the most popular 3rd party advisers are:
I’ve been asked by some of the 3rd party TSP allocation advisers above if I would provide a link to their service- Here is my overview and rationale for not doing so below.
The 3rd party TSP advisers each provide a subscription service for about 10-15 bucks per month, with monthly newsletters and ‘Allocation Alerts’ telling you when to move money from one or more TSP funds to another. Note that you can’t truly ‘Day Trade’ the TSP- TSP only allows participants to make up to two ‘unrestricted’ Inter-fund transfers per month.
The danger is Back-Testing. One of the services (TSP Folio) has only been around since only 2010, yet lists Back-Tested results going all the way back to 1990.
Yikes. In case you have not heard, Back-Testing investment results data is an exercise fraught with peril. Omit one month, one quarter, one year from your data set- And your Back-Testing method (and you) are in hot water. The SEC recently took down nationally-known CFP Ray Lucia for omitting some Back-Tested data in his ‘Buckets of Money’ strategy. Long story short, Ray lost his license for about a year and had to take a break from his radio show over the same period because the SEC viewed his Back-Tested data set as incomplete. Too bad, because Ray is one of the ‘good guys’ out there and has helped thousands of people (including myself) on his radio program.
In short, Back-Testing ‘what-if’ investment results is not a substitute for actual investment return data. Back-Testing is the same thing as me hopping in to a time machine and placing a bet on the 1980 USA Olympic Hockey Team.
GubMints’ advice – You don’t need to Day Trade the TSP. Just pick an allocation strategy that works for you and stick with it. Some would argue that re-balancing more frequently than once per year is ‘market timing’ in disguise anyway.
As sour as this last note sounds, I’d still rather see you day-trade your TSP than take the advice of a charlatan and roll your entire TSP balance over in to a high-fee Rollover IRA. Unfortunately the TSP Rollover Scam continues, even after last year’s GAO study exposing the TSP Rollover Scam. In one case, public broadcasting’s Ric Edelman recently advised retiring Army members to do TSP Rollovers at a televised seminar (in his defense, Ric did admit that the TSP has world-class low fees).
What Ric Edelman did not mention (and he should have) is that retiring/separating TSP Participants have the option to do a Partial TSP Withdrawal, which lets you continue to use the TSP as the low-cost ‘core’ of your retirement portfolio. The Partial Withdrawal funds you select to rollout of the TSP to an IRA service provider (I recommend Fidelity, Schwab, Vanguard, or USAA) to round out your portfolio can go in to slightly more exotic indices (REITS, foreign bond funds) not yet available within TSP’s menu. Best of all, if you’re not happy with your IRA service provider (or IRA returns) the TSP allows you to roll IRA money back in to TSP at any time (as long as you carry a minimum TSP balance).
When I separated, I did a Partial TSP Withdrawal and kept a stash of cash in the G Fund as my ‘safe’ retirement money. I recommend you do the same, since there is no other investment product like the G Fund – It offers guaranteed return of principal, 5-year equivalent yields, and the liquidity of a money market fund all in the same product.
SUPPORT GUBMINTS – Use This Link (free referral) when you Buy Stuff at Amazon.
Subscribe to GubMints:
|via RSS:||via Email:|