Retirement Investment Approaches

Discussion in 'Business, Investing & Finance' started by SeabeeGator, Apr 14, 2020.

  1. SeabeeGator

    SeabeeGator Well-Known Member
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    Upfront: my goal is to grow my TSP/401k but mitigate big losses (especially if predictable). I’ve got about 30 years until retirement and I don’t mind being aggressive but not “options trading” aggressive.

    I’ve been reading a lot recently about seasonal investing. Seems like there is some validity to it but you have to really be into investing to make it work or “time” the season.

    Stuff I’ve looked into:

    May/November sell/buy seasonal timing
    Sy Harding’s take on Seasonal timing
    Fabian
    PENTAD

    Fabian seems to track the S&P 500 buy and hold strategy well, the two seasonal timing strategies fall short of S&P, and PENTAD outperforms but seems fairly intensive to make work. I used this site to read up plus others:

    Extrategic Dashboard - Seasonal Timing Strategy (Updated)

    Based on what I’m seeing, unless you are really dedicated, buy and hold - except in extreme circumstances - seems to be best. But I came across this claim:

    Best TSP Allocation Strategy

    That suggests otherwise. On the surface, the claim makes sense but seems to rely on some “Bellweather” model that predicts when to drop out for the summer/fall and when to jump in late fall. Has the feeling of BS but it’s intriguing.

    So questions:

    Is any form of seasonal trading junk science aimed at selling services?

    On the first site, it claims the upside of seasonal investing is that it increases “risk adjusted investing”. What does that mean - risk or no risk, the S&P buy and hold outperformed those strategies by double over 40 years - what am I missing?

    Is there an upside to using these strategies to diversifying part of a portfolio?

    End state: really just trying to start a conversation novice/intermediate investors can participate in if they want to take their retirement investing a little further. Also trying to lay the groundwork for jumping into a little more aggressive investing, like a personal trading account on E Trade.

    Thanks for any responses and look forward to the conversation!
     
  2. FireFoley

    FireFoley Senior Member
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    That is some pretty heady stuff and I will have to look into some of that stuff on one of my insomniac nights, LOL. All kidding aside, there are a lot of seasonal generalities out there and maybe many of the ones you sighted go more in depth. But there is the January effect, the Sell in May and go away crowd, so goes the 1st 5 days so goes the entire year, buy Rosh Hashahnah sell Yom Kippur (or maybe it is the opposite I don;t remember), etc. etc etc. I personally have never bought into the seasonal ideas, but that does not mean they don;t have validity. in fact they might work within a retirement account where you are limited to funds, etc. My only thoughts regarding funds investing, etc. is to only buy on down days, since the price is set after the close. but if you do follow seasonalities, perhaps you could alter your amounts to match those seasonal patterns. But is it possible that these things have developed b/c just like technical analysis, everyone has the same numbers (support, resistance, 10, 50, 200 day moving averages, RSI's, MaCD's chart patterns, etc. etc.) and the herd mentality all congregates around these same levels?
     
    • bradgator2

      bradgator2 Rioting
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      I've always simply been steady with each paycheck. It's automatically withdrawn just like a bill. Technically... I never even see that money, so it's not like I am missing it. I even scrape that money off the top like a tax when I do the family budget... that way I really never see it.

      So then, my only real choices is where does that money go. Which I dont think is the point of this thread.
       
      • BMF

        BMF Bad Mother....
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        CBG - you're under 30 years old? Wow.

        My advice is to max out your TSP - that should be priority #1. I know that's no 'sexy', but in the long run you'll be glad you did. It's one of my biggest regrets financially - when they first started TSP I was still in the reserves and you could only put in 3% - I was an E5 and was like, "That's only like $15-20 a drill weekend!" (in my mind it wasn't worth it), so I never opened it. Then they started increasing how you could put in....then I went to OCS and returned to active duty...and it wasn't until I made O3 (in 2007) that I opened a TSP....then I didn't start maxing it out until about 5 years ago. I turn 50 this year in August, so I can put in even more starting this year. So...that's my 'lecture' to you on this subject.

        On the other stuff, I do have a non-retirement brokerage and I've done well over the years...but I have lost over the years too (I'm still up, but I've done some stupid sh*t!!). One of the less 'sexy' things I'd recommend is the hedge funds. Those are good outside of your retirement accounts too.

        Some of the stuff you posted I'm 100% unfamiliar with....I'll let some of the smarter guys here respond to that.
         
        • SeabeeGator

          SeabeeGator Well-Known Member
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          I wondered about that. I did some research and the “seasons” of investing date back hundreds of years - they centered around the growing season for crops. Basically, farmers would take out loans to pay for everything they needed to plant in late spring, would work the fields tirelessly through fall, then reap the rewards of harvest and spend it on the economy. Anyhow, from what I was reading, that trend is still quasi-valid - especially for small businesses. The challenge is knowing how to time it. But from what I am seeing, that is a ton of work and the buy/hold seems like a better “time” investment. Regarding the herd specifically, do you think it applies at an “index” level? The diversity of companies, industries, etc would lead me to think that herding was less a factor unless your implying that some investors bail on the market completely around the same time.

          Question though: based on what I was reading on that site, the seasonal strategies were given some credence because of portfolio diversity. They returned about 1/2 of a buy and hold strategy but did reduce the risk - some. At that steep of an opportunity loss, would it even be worth it? I do not view it as similar to diversifying with bonds - those are relatively safe. The seasonal strategy is still messing with the market.
           
        • SeabeeGator

          SeabeeGator Well-Known Member
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          That’s precisely the point of the thread! I have a set percentage of money I set aside and, based on my current budget, I am happy with it.What I would like to discuss is how to invest it and strategies that novice investors can understand. I brought up “seasonal” investing because its a fairly mechanical investing strategy - based on some factors, you either put in or pull out your money from stocks/bonds.
           
        • SeabeeGator

          SeabeeGator Well-Known Member
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          :lol: no, not under 30. I joined later. Coming up on 35...

          I’m not maxed out but I’m definitely investing. We built our budget and the amount we are putting in required cut backs in some creature comfort levels. I will do more as time goes by. What is the max again?

          You mentioned hedge funds. Any recommendations? Does that reduce your portfolios risk compared to other investing opportunities (outside of 401k/TSP)?
           
        • BMF

          BMF Bad Mother....
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          I meant to say "index" funds, not hedge funds. I'd keep an eye out for hedge funds about a year from now - they'll all be pouncing on a real estate rebound.

          The max under 50 is $19,500. I understand, maxing it out takes a lot out of your bring home money. I'm in DC, so my BAH is pretty high plus I'm collecting my FD pension - so I have multiple income streams. I'm shooting for that 100% VA disability rating too!! (I started the process but haven't heard from the VA yet on anything).
           
          • SeabeeGator

            SeabeeGator Well-Known Member
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            Ah, index funds. If I set up an individual trading account, I will most likely put most money into that then pick and choose from there. Do you do any industry specific index funds? I was thinking about researching some of them - like entertainment - that are in the crapper right now but should rebound eventually.

            I would max out if I could but twin 9 YOs don’t allow for that much. I have a decent 401k built from a past career, I plan to continue investing into TSP (I started 2 years ago but was not smart with it. Wish I would’ve known more and started earlier... better late than never!), and I’m bought into full retirement (not the BRS) so I should be ok once that second career starts at 50ish.
             
          • bradgator2

            bradgator2 Rioting
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            Well, this is specific for my 401k. I have been maxing it out for years. There is simply noway to beat the tax savings of having $19,500 less in income.

            I dont have a huge variety of choices inside my 401k. I want my choices to be spread across different sectors. I try not to overlap. I then try to weigh the fees.

            For me, I am very aggressive and my generic choices are:
            15% in a mid cap stock fund
            5% in a real estate securities fund
            10% in health science fund
            25% in a science and tech fund (this one has some overlap)
            10% in a small cap growth index fund
            30% in a blue chip growth fund
            5% in a utilities fund

            I will visit these roughly every month and might make some small tweaks. I am only down 8.5% this year... so I cant complain too bad. Up 9.22% over the lifetime of this particular account.

            I have an IRA that I have rolled several old 401ks into. That one is very complex and I pay to have it managed.
             
            • BMF

              BMF Bad Mother....
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              I have a brokerage w/ USAA - but USAA is getting out of the brokerage business in May and it's all rolling over to Charles Schwab. I have the USAA S&P 500 Index Fund in my Roth IRA and my non-retirement mutual fund account (I actually own 3 other different USAA funds). I also have a Vanguard and Fidelity mutual fund in my USAA Roth.

              You can google "best S&P 500 index funds" and make a choice. They are all very similar, just keep an eye on the fees. USAA's funds are great on fees.

              That's good you're not in the BRS, although that's a great option for people who don't plan to do a full 20 or more. And yes, it is better late than never (I was 36 in mid-2007, just shy of 37 years old, when I opened my TSP). It's well over $100K now...but should be closer to $250K had I opened it in the late 90's. I still don't understand why they only allowed 3% initially (I literally made around $250 for a drill weekend, so if I opened it then at 3% it would have been less than $10/month!).
               
              • FireFoley

                FireFoley Senior Member
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                @SeabeeGator you have gotten deep into the weeds with this seasonal thing and planting of crops, etc. Not bashing it at all, as it has merit, but it got me to thinking back to a guy named Arch Crawford. I am not sure if he is still around but his entire investment thesis was based on the solar system and he would periodically be on TV saying that Saturn is circling his Anus or Uranus, and Jupiter's 4th moon is about to interact with Neptune. It was some fascinating stuff, to me akin to asking the magic 8 Ball for advice (My sources say no), But if you want, you should look up Arch Crawford and watch/read some of his theories and how he determines when markets enter either bear or bull phases based on the moon, sun and stars of different galaxies.
                 
                • SeabeeGator

                  SeabeeGator Well-Known Member
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                  Wow man, thanks for the detailed breakdown! I wish my 401k had that diversity. I have 29 funds to choose from but they are just typical funds. Some try to outgain the Russell 1000, others the S&P 500. It has a mix of funds from the big players - vanguard, etc. No industry specific funds. The most interesting one is the jennison large cap growth fund that has consistently outgained the other large caps in each metric (by 50%+) but carries a higher fee (0.41% vs 0.14% for the Vanguard FTSE Admiral). I’m split:

                  Large Caps
                  Jennison 30%
                  Vanguard FTSE 20%
                  Vanguard Social 10%

                  Mid Caps
                  T Rowe Price Midcap 10%

                  International 10%

                  Balanced
                  American Funds Balanced 13%
                  -65% stocks, 30% bonds, 5% cash/other assets; cool fund

                  Bonds - 7%

                  There is a real estate fund in there but it’s performance continually lags the others. Don’t see the benefit other than being different.

                  My TSP is limited in options but produces well. I have it broken down pretty basically. 70 large caps/20 mid-small Caps/10 government bonds.

                  Trying to figure out if I should leap into other investing vehicles. Maybe set aside some “play money” just to see if I can get a good deal. Like RCL or SW.
                   
                • SeabeeGator

                  SeabeeGator Well-Known Member
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                  Thanks for the advice! That 3% is hilariously bad. My 401k, which I haven’t contributed to since 2013, is near 100k and growing. Been lucky there. I used to put 21% of the paycheck in so it grew quick. We are slowly increasing the % into TSP. We are adding a percentage or 2 a year. Not the “best case” but working towards it. Kids are expensive!
                   
                  • SeabeeGator

                    SeabeeGator Well-Known Member
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                    :lol: will do. My mind works like follows:

                    Read all the advice, dig in and understand, ask questions when I don’t, then make a choice that doesn’t cause me a ton of work but gets me close to the objective.

                    This seasonal one was intriguing because of the claim made by TSP Smart. Especially the thought of dumping money into the bonds at the beginning of bear markets using analytical tools. But it also seems “too good to be true”. Figured the combined knowledge of this place would ferret it out.

                    But it’s interesting that you point out how deep in the weeds in getting. I know you work in the finance sector doing something with investing so what do you normally see with investors? Set it and forget it? Automatically rebalance once a year unless something major is going on?
                     
                  • bradgator2

                    bradgator2 Rioting
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                    Most importantly, make sure you get any match into your 401k. After that.... the options are endless.

                    Keep going on the 401k until you max it.

                    A Roth has basically endless options in whatever the stock market has to offer. That money will be tax free because it is post tax money going in. Limit is $9000 for a married couple and there are income restrictions (I think). We have a nice Roth.

                    You can also save into a healthcare savings plan. I think the max is $7000 per year. We max that out.

                    You mentioned kids... you can save into a 529. We have put $100 a month per kid since the day they were born.

                    Detroit has a totally different and interesting strategy.

                    Just do something.
                     
                    • FireFoley

                      FireFoley Senior Member
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                      I would say amongst most people, this is it. don;t get me wrong, saving in any way is a plus, but I find those that contribute to funds at the same time each week, bi weekly etc, don;t really ever learn anything and tend not to follow their money. And since most are limited to funds, by definition they will always be around average. Funds will have the good and the bad so they will probably end up in the middle. But here is the kicker. Most, IMO, have no idea what fees are associated with their account(s). They had some insurance salesperson help them open it up or get enrolled and little do they know that a litany of people are getting a piece of their pie every year. The fund, The person who enrolled you, that person's firm/boss/, other members of the salesperson's team. Sure maybe it is small but it adds up. Out of this terrible economic situation, something positive could be had for those who unfortunately have been furloughed/fired/laid off, etc. They can (if they choose) moved their limited choice 401K and roll it into a regular IRA (could do Roth but that may involve more taxes and problems etc.). But lets keep it simple. Since many are just in some basic fund or funds they could roll into an IRA, probably invest in the exact same funds or actually into a fund that is FREE, and they will be free of those leeches who are getting a piece of their pie every year for doing NOTHING!. And if they get rehired or get a new job, they can get back into another 401K. You want to devour some reading? Go see how much the average person who has a 401K for say 30-40 years pays in siphoned off fees over that time period. Can you say 6 figures?
                       
                      • SeabeeGator

                        SeabeeGator Well-Known Member
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                        I can’t touch the 401k anymore other than current balance. I do not work for that company any longer. TSP has no match with the option I took - full vs reduced pension. Those other options are something I’ll definitely look into - especially the 529. I need to research that a lot more. I’m going to give my kids my GI Bill which should get them a year and a half free wherever (public). Need something to close the rest of the gap.
                         
                      • SeabeeGator

                        SeabeeGator Well-Known Member
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                        What would you recommend for a cap on fees by sector? They seem all over the place. That jennison has a high fee but it’s way outperforming the others. Not sure how to calculate the cost benefit on fees and returns - another thing I need to read up on for sure.
                         
                      • bradgator2

                        bradgator2 Rioting
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                        oh man.... you gotta roll that old 401k into an IRA.
                         

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