DCA vs Lump Sum in TSP

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Who needs S,I,G,F, and F? C Fund to the moon!!

The conversation around my standing desk has been can you realistically beat the market using only TSP funds? We have several situations that you will find yourself in when it comes to how you manage your TSP funds:

  1. Never got around to contributing anything into TSP because you fell asleep during that financial education brief and/or already independently wealthy (why are you even here?).
  2. Never ever logged into your TSP because its a pain in the ass to wait for the mailer to come, then you forget the password, then you got to wait for another mailer for the pin. Everything goes into G fund since you were an O-1 . Your enjoying your 2% earnings since is super safe over in G.
  3. Just randomly shoved money into all 10 funds, Some how have money in the defunct L2010 lifecycle fund yet your an O-2. Don’t even know what the other letters mean.
  4. Doing the Dave Ramsey CSI: 60:20:20 because you heard him mention it one time when listening to the radio at 5 am on AFN. You also never question him and have cut up all of your credit cards. You truly believe you can be trusted with an officer’s commission, but can’t handle a credit card.
  5. You actually thought about rebalancing this thing since you get two transfers a month so why the hell not?

Hopefully you are in the #5 group and realized that you have the free option to rebalance funds yet no one ever does. You can sell off shares of one fund and buy shares of other funds, for free. Now if you believe in the myth of dollar cost averaging or DCA then this is the complete opposite of what you know with strong conviction is right since your overpriced broker told you so in 1976.

In rebalancing you will have to kind of predict what funds will out preform others, or just buy up funds that recently went on sale. This does not mean get out of a fund after it has lost value, but rather have money sit in G fund waiting for another fund to loose value, and buy up a bunch of it, AKA lump sum investing. You always have an option to move any fund into G fund to realize gains. I right now put all my contributions into G and rebalance when told by TSP pilot.

A very vocal field grade officer called me immediately and demanded that I was wrong about DCA vs lump sum investing. I said go and check for your self here and you can see if you had done things differently what would of been. You can see some times yes DCA does pay off over lump sum when you bought when everyone else is buying and the index was overpriced, but overall by lump sum investing even at the middle of an upswing or the middle of a down swing you make more money than forcing yourself to buy when the index has peaked with DCA!

My strategy is when the dumb money news reports are all about doom and gloom, and people are jumping off buildings after a correction, this is time to buy!! This just happened to AAPL last week, huge dip, and BRK.A saw the stock was on sale and bought up a whole lot of it. You don’t see Buffett trickle in money regardless of the share price, he did a $1.1 billion lump sum investment when AAPL went on fire sale for $90 a share from a whopping $130 exactly a year ago.

Remember this is an index fund and it will go back to its actual value eventually, and not keep on going to the moon! It’s like all those Bernie Babies you have in your closet, great investment right? Pretty sure you can sell them at market price right now. You would of been a fool to force yourself to buy Chilly the polar bear for $1750 just because you think it will go up in the future. You know it’s ludicrous to buy that for that inflated price. You should have the same thought with the S&P 500 represented in the C fund right now.

Think about the DCA people, they would of bought anyways, your just buying what you would of already spent at the peak all at one time after the index goes on sale. What if it’s not the bottom? Who cares, you DCA people would of bought anyways. Don’t cloud your judgment with emotions, just do the opposite of what those dumb money losers are doing. Sorry that it makes you feel uneasy, maybe you should just stick with the G fund and use your stupid debit card for everything.

If your not a wonk or just don’t care to do the research, you can pay a service such as tsp millionaire, tsp pilotTSP Safety Net, TSP investing. I don’t endorse any of these companies, however if you are one of their owners, I can be your corporate shill if you send me some sweet schwag (I’m a size medium T-Shirt BTW).

There are free sites like The Fed Trader and TSP Allocation that just give it away for free. Now one such site Train Wreck Trader has challenged me to a duel starting with the Share Prices on June 1, 2016. We will have a $1000 each put into the allocations of our choice. I bought a membership to TSP pilot and will put the money into the aggressive allocation that the newsletter instructs me to do. I cannot disclose the allocations, but feel free to pay tsp pilot the monthly fee and play along!

Davey however will actually read the market and do all this nerdy stuff and determine his own allocations. At the commencement of this project on May 31, 2017 the winner will be awarded with bragging rights, and a $42,000 Gift Card To Dave And Buster’s! (jk) or whatever TBD later.

Stay tuned!



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