Best TSP Allocation for 2021

Part 4:

TSP Recommendation

When should I move TSP to the G fund?

Successful long-term investing requires knowing when you are close to a market top, understanding what actions to expect from policy makers, what the news narratives look like, and investor sentiment (euphoria).  There is a reason it is a "top" and it is not because everyone knows it is a top. We've seen the market drop over 50% twice since 2000. This is not something new to this millennium.  Bull and bear markets are part of the game.

From this very simple valuation ratio (Price of SP500 to Revenue) I can guarantee you we are nowhere near the bottom and starting another bull market. The only other time valuations hit this level was in 1929 and the ultimate loss was on the order of 80% during the depression.  It is also important to note, you can not time the market with valuations otherwise you would miss some of the largest gains that occur near the top. 

Our money system is taking the hit this time as the Federal Reserve papered over the damage in March that led to the epic rally in the stock market.  So if you wondered why the stock market could soar during a deep economic contraction look no further that the flood of money created to prop up the financial markets but not the economy.  This is unsustainable.

What most analyst do not discuss is that in the long run what your investments return to you is the cash flow of the companies you invest in.  Everyone is focused on the price going up and this only benefits you if you sell near the top.  Because as the price goes up but the future cash flow from operations does not, your long term return goes down.  And never in history has the market traded sideways waiting 12 years or more for profits to catch up with price.  Never.

With all said, it is better to give up some gains near the top than to ride the bear market down to a 50% loss or more.  After a 50% loss, it takes a 100% gain to get back to break even. We have seen two bear markets losing over 50% since 2000 so we know they have not been outlawed.

Market cycles the last 30 years have lasted 8 - 12 years.  Prior to the 1990s they ran 3 - 6 years and were often based on fiscal policy gunning the economy for re-election bids.  In 2020 we are hitting the longest bull market in history that started in 2008.  The reason for the record is because the driver of this market is different from all others - emergency monetary policy that never got turned off.  We are on a monetary cycle now with some fiscal overlays.  But the laws of financial physics have not been eliminated. 

Current or future corporate profits & cash flow do not match the prices being paid today for stocks and bonds and a major reset in prices needs to happen (bear market). Again, wealth is a stream of future income not a balance on your TSP account.  The same is true for valuations. If you are okay with extremely low future returns then the stock market was fairly valued last year.  As of when I wrote this, annualized returns over the next 10 years will be negative meaning the stock market will be lower in price in 10 years than today.

If you expect 8% returns from the stock market then it is extremely overvalued at the beginning of 2020. If the market is allowed to go through a cleansing bear market, you will get that 8% return from a much lower price level. Unfortunately the corporate debt levels today greatly exceed the debt levels in 2000. Debt is a claim on future corporate cash flows that cut in line in front of you the equity investor.  


With many corporations loaded up on debt to engage in stock buybacks, these companies are the first that will go bankrupt and need to be restructured to continue ops.  Small bailouts are one thing, but we have a nation of recklessly managed corporations and many will be restructured. This means the stocks sitting in the index funds you invest in will be wiped out bringing the index price down.  

The difference in losses between the TSP C and S fund is negligible compared the TSP G fund during bear markets or steep declines. I am not talking about market timing, I am talking about the market cycle.  There is also seasonal timing, but I'll save that for another article because knowing what is driving each market cycle is the most important determinant to your major allocation decision - equity funds verse the safer G fund (and sometimes the F fund). 

Update:  From 2016 to 2020 we saw a divergence in the performance of what I call the monopoly-cap stocks (very large cash rich companies) and the rest of the market.  These companies reside in the SP500 index and help the overall index, but within the index the majority of companies are doing worse than the index itself. 

What we have seen since late 2020 was a squeeze higher in the smallest companies.  The last time this happened was in 2000 for a few months prior to the market peak.  This market cycle is different from 2000, but it looks eerily similar in many ways.

The Reminder -The Market Cycle Matters

Best TSP Funds 2020

The last bear market in stocks lost more than all the gains of the preceding bull market.  Kind of silly to give all of your gains back and start over again, but this is what buy and hold is all about. Meanwhile the TSP G fund will continue plodding higher during periods of financial stress and rising interest rates. In other words, the TSP G fund will significantly outperform equity funds during bear markets.

The above bear market was only a cyclical bear market - the short kind.  We are at the top of a long secular bull market.  The secular bear market will look different.  

At the beginning of 2020 (pre-virus), over 40% of the Russell 2000 index (smallest half of the US stock market) had negative earnings.  When the index and funds provide the Price-to-Earnings they conveniently calculate the PEs ratios leaving out the negative earnings. In other words, valuation measures commonly viewed by retail investors significantly understate the valuation levels of the market.

As for the SP500 today, over half of the companies' debt is ranked one notch above junk bond status.  Forty percent of these companies are getting a pass from the ratings agencies since their level of debt already exceeds the threshold for junk status.  

The amazing recovery in early 2019 was due to a record-breaking quarter of these same over-leveraged companies buying back their own shares on the open markets with over half the buybacks financed with more debt not cash flow.  2019 was also the first year corporations burned more cash on buybacks than they took in from operational cash flow. All of this is unsustainable and only extended by global central banks breaking records in money printing to buy financial assets at the end of 2019.

The amazing recovery in early 2020 was not due to massive buybacks, it was due to the Federal Reserve pumping printed money into the financial system.  They are getting nervous about how far they can take this.  Something will have to be let go and they will choose the stock market over the money system.  They will continue to print and more of the money will flow to the real economy... meaning people.  But remember the economy and the stock market are not the same and have been negatively correlated this market cycle.

I expect the market to give back much of the 2020 gains once the Federal Reserve pulls back on printing money to buy financial assets.  Higher interest rates will also pop the bubbles if the Fed can not reign them in this time due to higher inflation.  

We give market alerts for deep market corrections and have nailed them for the last several years. 

Today's Market Cycle Considerations

Sorry, I had to move this section to member's only because my advice today is specific. 

You can join at the bottom of the page you are interested in reading this section in

Allocations for 2021

Buy & Hope

I get the same messages you do from "investment advisers" 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 subject.  I started my service in 2011 because I felt no one was looking out for the average TSP investor. 

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 30 years later!  

A Note About Investing in Retirement

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.  Commission-based financial planners are likely to 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 when you need to be in low-risk investments.  

Please don't move your funds.  You can do fine managing your own account.  If you do move transfer your funds out of TSP, consider keeping $200 in your account to keep your account open to allow you to change your mind later. 

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've been in.

Investment decisions require knowing both when to get in and when to get out.  I am not talking about cherry-picking the top or bottom, but simply being close.

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

We reduced exposure near the top in the early 2018 parabolic move, but the market was not indicating a bear market at that time.  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.

We don't spam, here are a few of our warnings in a chart.  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 annualized by several percentage for the last 60 years.  I haven't talked about this strategy, but I provide links at the bottom of the page.

Members have access to current charts and market warnings

TSP advice

Don't Go It Alone

I monitor the market for serious and reluctant investors so they can spend their time doing what they really enjoy in life and that is usually not watching the financial markets. And remember, long before there was fake news, there was financial news.   

I provide two primary services with our low-cost basic service that keeps we watching the markets full-time for you:

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 trading day almanacs to add to their investor tool kit. 

Don't forget to follow our free blog directly or via Facebook or Twitter

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Get our Market Warnings and Commentary

Our basic rate is only $75 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%.

then view

Allocations for 2020

Okay enough advertising...

 here are some of those links I mentioned.


TSP Smart Dashboard

easiest way to navigate our site

info on the favorable season strategy

the basics on seasonal investing

Retirement Investing

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 Thrift Savings Plan's own 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.  

or just join us



I can’t read enough!  You are saying all of the things I have been saying!  I have been successful for quite some time at stocks, but starting last December, I lost my read of the market.  Your writing is spot on and largely correct at guessing the future direction.  Love the service.  Naval aviator with an interest in finance…sounds familiar.  


Mr. Bond,
I was signed up with Sy Harding from March 2009 until his death. I told him once that I didn't know who was the smartest market adviser in the business but I was certain he was #2. I found TSP smart online last February and signed up. You have saved my six about five times in the past year. I'll be renewing and will keep trying to spread the word about your service. It is unreal how buy and hold has been sold to investors.
I believe I have finally found #1.
Best wishes for the new year and many more to come.

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