Seasonal TSP investing explored

Friday - 9/24/2010, 10:41am EDT

Tom Trabucco, Director of External Affairs, Federal Retirement Thrift Investment Board

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By Suzanne Kubota
Senior Internet Editor
FederalNewsRadio.com

The TSP Center has announced it's come up with something called a Seasonal Strategy for TSP investing, which it claims results in higher returns by moving your funds six times a year.

The TSP Center is not the Thrift Savings Plan. It is a private company, and calls itself a "free resource" for TSP investors.

Federal News Radio went straight to Tom Trabucco, the Director of External Affairs of the Federal Retirement Thrift Investment Board and asked if a seasonally-based investment strategy would work.

"It can 'work until it doesn't,' is basically the rule," said Trabucco. Like the old saying, "invest until May, then go away," using a calendar to time TSP investments has been tried before. And didn't always work.

"The two things that I guess I noticed," said Trabucco, "about this item in particular, the Seasonal Strategy, is first of all, they rely on 20 years worth of data. Twenty years is not really enough data to get good statistics from." TSP uses data going back to 1925.

Secondly, Trabucco said the strategy appears to call for turning over your portfolio six times every year, 100 percent each time. "Moving 100 percent of your account six times a year is a six hundred percent turnover. That's a very big bet." Two hundred percent turnover would be a lot of turnover for an aggressive fund, "and remember the TSP is designed to be passive."

Trabucco did see something good about the strategy. "If it stimulates interest among readers to look into these things, to talk about investment strategies with people who know what they're talking about, to do further research on it - it's all good."

Plus, he noted, it's free.

"Just remember they are not coming from the Thrift Savings Plan," Trabucco reminded. "They are coming from people who have websites and want visitors and have advertisers and are trying to generate attention to their websites. Take them for what they're worth."

After consulting with others at the Federal Retirement Thrift Investment Board, a coworker passed along a limerick, said Trabucco, attributed to Sir Alec Cairncross an economic advisor to the British government:

A trend is a trend is a trend,
But the question is when will it bend?
Will it alter its course,
Through some unforeseen force,
And come to a premature end?

Here at Federal News Radio, Senior Correspondent Mike Causey said he'd heard a limerick about the TSP too, but only got as far as "There was an investor from Kent," before his phone rang and interrupted him.