Buy low, sell high. Repeat as necessary

Monday - 12/5/2011, 2:00am EST

When it comes to their Thrift Savings Plan accounts, most of the 4.5 million current and former feds with money in it tend to follow what are described as "disciplined long-term investment strategies." Many move into the super-safe Treasury securities G Fund when the market dips.

A relatively small but vocal minority think the federal 401(k) plan stinks. That it doesn't offer enough choices. They would like to be able to invest in gold, green or funds limited to minority-owned businesses, or geographic areas.

Many financial gurus, including John Bogel, founder of the Vanguard fund, say the federal TSP (primarily because of its low-fees) is the best in the business. Allan Roth of CBS Money Watch says he wishes he could get into the TSP.

But a number of frustrated TSP investors say they are saddled with a dinosaur to navigate the fast-changing markets. Others believe a nanny state government is keeping them from making more money, either out of stupidity or by design. Here's an email I got on Dec. 1, followed by a response:

"Mike: The next time you tout TSP as "the greatest thing since sliced bread," you might want to keep this story in mind. After sitting out of the equities funds for eight months, I decided on Tuesday to go back in and take a risk. I was thinking that it is the Christmas Season, maybe I can make a percentage point, or two, and salvage some of this awful year. Or so I thought. Around 1:30 on Tuesday afternoon I moved my money from the G Fund to a mixture of C, S, and I Funds; over $425,000 in total. As you know the markets went "nuts" on Wednesday, but there was no way to time it, no one knew, AND, in fact, Tuesday afternoon when I did that, the market was mixed, at best. To make a long story short, my Interfund Transfer came thru last night at 11:00 PM, at least 35 hours after I submitted it. You got it; my balance was exactly what it was the day before. At the end of the day, rather than make a prudent trade, I had bought in at a whopping 4-5% premium over the day before.

"Now, there is no way that Tuesday was a particularly busy day for the TSP, unless busy in Louisiana means ten trades, or so, and it may. Sometime on Wednesday, and probably early in the day because my request was one of the early ones from Tuesday, the TSP exercised a trade of my G Fund Treasuries and purchased into the market. That market went up and then down and then up again throughout the day. WHAT HAPPENED TO THE MARGIN? That margin was in the neighborhood of nearly $20,000. You might ask Tom Trabucco (spokesman for the TSP) the next time he is on your radio show because if the TSP was a broker, we'd be in court in the next week. Federal employees should receive better service with respect to requests for Interfund Transfers.

"I have to tell you that the way they explain on their website how Interfund Transfer Requests are exercised (and the timing for them) is weak at best. I know we shouldn't day trade in the TSP. I don't. I know that we shouldn't try to time the market. I don't. But, you cannot tell me that the TSP cannot exercise a trade in something less than 35 hours; or that it makes it's trades at the very end of the day. TSP took the margin. I shouldn't have been whacked like that. Any excuse like "think about it as you being in the market the long haul" is bogus. I can tell you that if the market had gone down 5 percent, I'd still be wondering why I got by without taking a hit. But I should not be hit both ways (kind of like damned if you do, damned if you don't). This has never happened to me. My Interfund Transfers have always gone through quicker.

"I have an MBA. I remember finance and it doesn't work like that. Individual retirement fund account performance depends very much on you personally watching your account, managing your allocations prudently, and compounding.

" By the way, nice to see the market going down today (Dec. 2) because now I can consider myself doubly whacked."

The response from a long-time TSP fan watcher:
"He had a bad day and I don't want to make it worse. But the TSP Web site says that interfund transfer requests received by noon are generally processed as of that business day; those received after noon are generally processed the next day. The writer says he submitted his IFT request at 1:30 p.m., which is after noon. Secondly the Web site explains that, 'The TSP is a daily valued plan which means the value of your account is determined each business day based on the daily share price and the number of shares you hold in each fund. At the end of each business day, after the stock and bond markets have closed, the total value of the funds holdings (net of accrued administrative expenses) is divided by the total number of shares outstanding to determine the share price for that day.' I have no idea why your correspondent would expect an 'intraday' price. The most amazing thing is that he does not consider what he did to be "timing the market". He sat out for eight months (because he did not want risk during that time). Then he jumped back in on one day with all of his dough - nearly half a million bucks - because he felt it would be a good 'season' (read time) to pick up a percentage point or two. Yet this was NOT an attempt to time the market. I don't understand it, but then again, I don't have an MBA. W