Overview of the TSP "Lifestyle" or L Funds

By comparison the TSP Pilot Portfolios are a dynamically and professionally managed portfolio whose fund allocations and risk assignments constantly change with changing market conditions without emotionally "chasing performance." This is a fundamental and critical difference in investment posture--black and white (or red and green ;-) when it comes to your account's exposure to market losses.

The passive TSP L Funds will NOT protect your account from major losses when stock markets dramatically decline--often over long periods.

Had you been invested in those stock funds during 2000-2003 or 2008 you would have lost up to 55% of the value of your TSP account's contributions! Just because you are younger doesn't necessarily mean that you would WANT to assume that additional market risk. We believe YOUR TSP portfolio should match YOUR investment risk/reward profile regardless of your time to retirement.

While Wall Street professionals kept saying over and over again "buy and hold and never look back...buy and hold and never look back," the market then proceeded to wipe out $8 trillion of investors wealth from 2000-2003 and another $7 trillion in 2007-2009.

Almost unbelievably, it was during those depressing bear market years when investors lost so much money and confidence that those same Wall Street professionals who preached "buy and hold and never look back!" were making their biggest salary bonuses in history. We now know why they didn't want you to look back!

The TSP stock funds are lower now than they were 11 years ago! Buy and holding broad market indexes is simply a recipe for failure.

While following the L Funds "may" provide a long term performance improvement for TSP participants who...

• Have little to no investment experience,
• Receive little to no professional guidance,
• Or normally keep most funds locked up in the safe-harbor, low-return, G Fund.

Performance

In Table XXI we have provided the 21 year results of the new TSP L Funds, assuming the TSP Board had made them available then, using with a series of performance and risk metrics. Included for sake of comparison to each standard TSP L Fund is a very basic, long-term market timing model.

Since the TSP's L Funds were just released in August of 2005, alternative proxy funds were used for this analysis taking the history back to 1988; since the TSP L Funds are comprised of simple and static formulations, the chosen proxy funds would track almost exactly with the TSP's new offerings.

While our L Fund market timing models, provided for example only, are not as sophisticated as the TSP Pilot Portfolios, they do show the important benefit of adding even a very basic, long-term market timing signal to each of these new TSP L Fund portfolios.

In each case a basic, long-term computer timing model applied to each of the L Funds would have increased performance and decreased risk substantially requiring only about one switch per year from the L Fund to the safe-harbor G Fund.

These generic "timed models" show what a major impact market timing can have on performance and risk exposure. For each TSP L Fund you can see that the addition of a very basic timing model would have reduced the market risk (Mdd) by 75%!

Even following such a very basic long-term timing model would have saved TSP investors from the huge losses that would have occurred sitting through the devastating 2000-2003 bear market that began after the bust of the high-tech bubble and again in 2007-2009.

Don't test the retirement waters alone. Put your TSP ship a league ahead by requesting your FREE ISSUE or by SUBSCRIBING at our special reduced rates today!