“Sell in May and Stay Away” Words to live and invest by? I don’t know who coined the phrase but I did a bit of study and yes this technique would have worked out for you is you had implemented it over the life with the TSP retirement account. Of course we know past performance does not guarantee future outcomes but there is certainly something here that makes this investor think that just maybe there is certainly something a lot more for the story this time.
You can find five resources available in the Thrift Savings Plan.
The C Fund is based on the S&P 500
The F Fund is designed to match the bonds inside the Lehman Brothers U.S. Aggregate (LBA) index.
The G Fund invests in short-term U.S. treasuries
The S Fund follows the Wilshire 4500 index
The I Fund follows the EAFE index
From its inception in 1988 through the end of 2005 the C Fund (based on the S&P 500) has averaged 12.61556% per year. Within the months October through Might it averaged12.87611%. From June through September it averaged -0.26056%. For the same 18 year period, the F Fund averaged three.356111% for the four months June through September. Had you sold all of your share C Fund on May possibly 31 and moved all your cash into the F Fund and then moved all of one’s cash from the F Fund back for the C Fund on September 30th, you would have realized a three.616667% per year improve inside your pace of return over 18 many years. Let me repeat this, a 3.616667% annual increase depending on only two trades per year.
From 2001 through 2005 the C Fund (depending on the S&P 500) annual average was only 2.22%. Its average gain October through May possibly was 9.24% although it’s June through September average was an appalling 7.02% loss. Utilizing the same technique as above, our average rate of return would have jumped from an anemic 2.22% to a healthy 11.38%. That is an amazing boost of over 9% based on just two trades per year.
Because its inception in 2001 the S Fund (depending on the Wilshire 4500 index) has averaged 9.314% and the I Fund (depending on the EAFE index) averaged 6.56%. They show the same pattern of gains October through May possibly, with gains of 14.05% for the S Fund and 10.368% for the I Fund annually during those people eight months. They also continue the S Fund pattern of losses Jun through September, a 4.736% loss for the S Fund and 3.808% loss for the I Fund. Using the same method of eight months within the S and I resources and four months inside the F Funds, you would have realized additional gains of 6.336% for the S Fund and five.378% for the I fund brining your rate of return to 15.65% for an S+F strategy and 11.938% for an I+F technique.
What do you think about this? Join the TSPcenter forum and let me know. My gut tells me we are in for a poor summer. Obviously that could be a result of the pepperoni pizza I just ate.
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