I was looking up information about the Lifecycle funds the TSP started offering in 2005, and your site came up on one of my searches. I’m looking at a wide variety of free help groups and newsletters to try and get a good picture of what are good strategies with the goal of either finding the best allocations from one source or a good synthesis strategy from the various sources available.  Your gains seem to be among the best I’ve found.

-M.W.

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Answer:

All investment advice, including that in our newsletter, is based on some investment methodology. Some examples of investment methodologies are:

• Select the mix of funds that maximizes expected returns while not exceeding a fixed maximum risk. (This is the methodology used by our newsletter.)
• Buy and hold the TSP Lifecycle fund with the appropriate time horizon. (This is the methodology recommended by TSP.)
• Attempt to time the market by attempting to buy at price lows and sell at price highs. (This is “market timing”, attempted by many people.)

Look at a few investment approaches. Try to understand their methodologies. Look at the returns that they have provided over many years. Consider both simulated and actual returns.

Then, pick an investment approach that makes the most sense to you and stick with it. You might change your mind about which investment approach makes the most sense to you later on, but while you think that a particular investment approach is a better fit for you than other approaches, stick with it.

Or, if you cannot decide between several approaches, you might want to split your money between them. In the language of statistics, this is called “model averaging”. For example, if you think that two different approaches are equally good, you might want to put 50% of your money into each approach.

If you are a newcomer to our newsletter, you might still be evaluating whether our approach is a good fit for you. That’s fine. Take all the time you need. But once you decide to follow our approach, follow it.

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