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TSP Smart Investor& Vanguard Smart Investor

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Best TSP Allocation in 2018

You can now view our updated  Best TSP Allocation for 2019

Part 3

The Best TSP Fund for 2018

As stated in the Best TSP Funds, it depends where we are in the market cycle. 

A) Since we are in one of the top three most over-valued stock markets by the measures that actually predict future returns, I can pretty much guarantee we are not anywhere near the bottom of the cycle.  

Note that the 2003 bear market bottom in terms of valuations was the highest bottom for any bear market in the last 60 years and a return to that level of valuation from the 2018 market peak would require greater than a 50% drop. I say "valuation" because either price has to drop 50% or profits have to climb 100% to return to the 2003 level in terms of market valuations.  In other words, you are buying high here.  This is not a timing call, just a historical perspective.

B) And also because the primary driver of the global stock market is reversing (and it is not the economy). And it is not corporate profits because they are still at 2012 levels even with the current bounce in growth due to energy prices recovering. Hint: It is a reversal of extreme monetary policy.

C) And because the odds are high we are in for an interest rate shock in 2018 when the market is flooded with treasury bonds from the bloated federal deficit and from our central bank selling down their balance sheet.    

Most analysis and mainstream media are focused on the elusive consumer inflation when analyzing future interest rate hikes by the Fed.  But it will really come down to bond supply and demand that is going to shock interest rates much higher the next two years as the US deficits soar from the tax cuts.


The best funds today

The best funds for 2018 will be a shifting mix of the TSP C fund and the TSP G fund. What that mix is will change over the course of the year, but the C fund should capture similar gains of the S fund and then not lose as much when the stock market finally tops.

The best allocation between the C and G fund will continue to depend on the actions of primary driver of the markets this cycle (the central banks), along with the level of corporations buying back their own stock, and the market's preference for holding risk assets as the environment changes. 

If you think the stock market is going up because of a strong economy, read the second and third links in the text above.  The stock market is ultimately going to take hit because of the "good" economy and coming deficits impact on interest rates.  The question is when.

To answer when, we track risk-sensitive investors and whether they are holding onto risk assets or selling.  Their selling usually leads the stock markets sell-offs unlike corporate profits, the economy, wall street analyst, etc.  BTW, the stock market is a leading indicator of recessions and not the other way around.

The Reluctant Investor and Staying Invested

In my conversations I have found many investors who were burned badly during the last two bear markets and remained reluctant to re-invest until very late in the bull market. This is very understandable but also leads to frustration in extended bull markets like the one we are in.

Investment decisions require knowing both when to get in and when to get out.  Both matter in long term investing. 

Market tops always happen when the news is most positive and bottoms happen when the end of the world is around the corner. So do not let headlines determine your allocations. 

Remember everyone can not get out at the top.  Tops form when the smart investors start heading to the exits before everyone else does. And this happens when the headlines are most positive.

We reduced exposure near the top of the recent parabolic move, but we still have some exposure.  We are watching our long term signals that lead the stock market and provide insight if a move is a correction or something more.  We are also watching the long term trend of the market as seen on the chart below in blue lines? 

I hope you bookmark our free blog or sign up for our blog posts via e-mail at our blog's website. I hope you become a TSP Smart Investor.  If you want to receive our e-mail warnings like the one represented by the red arrow we sent to members to reduce allocations to equities, please join us.

The last warning we sent prior to the recent one was just prior to the 2015 market correction.  We don't send many warnings (I'm not into email spam) since we are not a market chasing timing service.  We are a bear-market-avoiding service along with providing a simple-to-execute seasonal strategy that has beaten buy & hold by several percentage for the last 60 years.  I haven't talked about this, but I provide links at the bottom of the page.

I started TSP & Vanguard Smart Investor in 2011 because I felt no one was looking out for the average TSP investor. I get the same messages you do about "don't panic" and "buy and hold is the best strategy"...after the market plunges.  As you see, I have a different point-of-view on this.

What the buy and hold types fail to mention is that it took 13 years for the market to break even after the 2000 market top.  They also fail to mention that Japan's market topped in 1989 and they are still waiting for a new high 29 years later!  

I monitor the market for serious and reluctant investors so they can spend their time doing what they enjoy.  I provide two primary services:

1) Bear market and large correction warnings

2) An easy-to-execute strategy from my best practices research to avoid losses while capturing most of the market gains.

And serious investors should take a look at our TSP almanacs to their investor tool kits. I use them all the time in my analysis.

but most important, don't forget to follow our blog directly or via Facebook or Twitter


Blatant Advertising

Try us for a year

Our basic rate is only $85 annually which is less than 1% of $10,000 account.  

Compare this to the last two bear market which cost the stock market over 50%.

Okay enough advertising...

 here are some of those links I mentioned.


TSP & Vanguard Smart Investor Dashboard

easiest way to navigate our site

info on the favorable season strategy

the basics on seasonal investing

About Sy Harding

Life cycle funds

TSP F fund

Retirement Investing

A Retirement Note

When most investors retire, allocations need to shift to low-risk funds for income production.  For this reason above all others, please do not leave TSP when you retire!  I am probably one of the few advisers who recommends considering moving your other retirement account funds to TSP to take advantage of the G fund in retirement (along with the low fees).  Yes you can do this.

Can you imagine your broker or bank telling you to pull money out of their account and send it to your TSP account where they lose fees.  And I do not see commission-based financial planners giving this advise either, more likely they will talk you into moving your funds to their accounts and products so they can manage them for you to make your life easier.  It is not just the advisers fee that will cost you, it is the loss of interest income in retirement by not having access to the TSP G fund.  

Please don't move your funds.  You can do fine managing your own account.  If you do move out of TSP, consider keeping $100 in your TSP account to keep your account open to allow you to change your mind later. 

A quick note about me

After earning my degree in Investment Finance, I joined the US Air Force and thus became a TSP account holder.  I never gave up interest in finance and continued to study the markets while serving. I discovered I had to do some unlearning from what I "learned" in my financial planning courses.  Through my website and blog I share what I've learned

I spent years researching the best strategy for the TSP funds.  I wanted a strategy that was easy to execute and did not ride the bear markets down. I almost gave up then found Sy Harding's strategy which only required two trades a year and was rare in that it beat buy and hold over the long haul.  

Mark Hulbert of the Financial Digest fame tracked Sy's record and often wrote about him on Market Watch.  Sy invested in the Dow Jones Industrial Averages. I simply optimized Sy's seasonal strategy to fit our TSP funds.  

I also developed my own TSP almanacs which break down the annual patterns of the markets to the trading day of the year. On my website you will find a more in-depth breakdown than the TSP website for each fund (to include the Lifecycle funds) to better understand what is driving their returns.  It all helps in determining the best TSP allocation.

I started my company in 2011 and my service in 2012.  I hope you have some time to look around the site - it is designed for you.  And did I mention you can also sign up for my free blog.  

This website provides a commercial service and is not affiliated with the Thrift Savings Plan administration.  Recommendations are based on our best judgment and opinions but no warranty is given or implied.  Past performance does not guarantee future performance or prevent losses.   All readers and subscribers agree to this website's Terms of Use and Investment Disclaimer.   Copyright © 2011-2019 Ravenstone Research Inc.  All Rights Reserved.  


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