Yearly Returns by Fund vs. TSP Pilot Standard Portfolio

TABLE IV

It can be seen from Table IV that TSP Pilot's annualized performance was over 50% greater than the core TSP C and S stock funds over the full 19 year time period (18.4% vs 12.1%) while accepting less than ONE SIXTH the market risk!.

While not every year was as successful ('91, '93, '94), the market risk of the TSP Pilot Portfolio was almost always less than that for any of the individual TSP stock funds across the entire history.

In recent years unprecedented market volatility has kept portfolio returns under pressure. However, we expect the unusually high levels of recent volatility to end before too long as markets return to more historically "normal" volatility levels. While TSP Pilot Portfolios came up a little short in the past couple years, it is important to note that the significantly reduced market risk incurred from following the TSP Pilot Portfolios permitted greater investor "staying power" during the recent extraordinary market volatility often contributing to better net results.

How? The reduced risk and market exposure of the Pilot Portfolios helped to keep investors continuously committed to their diversified portfolios thereby reducing the costly "knee-jerk" emotional reactions many investors would normally have experienced from "throwing-in-the-towel" and selling their TSP stock funds after the frequent and sharp market sell-offs of recent years--selling out precisely at the wrong times. This fact is a truly key one in the successful management of TSP accounts.

In fact on a risk adjusted basis the TSP Pilot Standard Portfolio performed extremely well throughout as it accepted less than half the exposure to downside market risk of any of the TSP Funds--including the new L Funds. Remember that the main thrust of TSP Pilot is to optimize investor returns while minimizing downside exposure for each given level of risk by using a balanced portfolio of the available funds in the Plan.

For typical investors in 401k retirement plans risk and volatility are often mortal enemies of successful returns. If market risk is not controlled and managed effectively any positive returns may be quickly turned into major account losses when markets suddenly reverse. In fact, historically, most 401k investors sell or pull out of their plan's stock positions (including the L Funds) when markets turn dramatically against them. Invariably they sell when the pain level of the decline is at its greatest--and always...always at the wrong time. The TSP Pilot's diversified Portfolios have always reduced that volatility "pain level" keeping TSP investors consistently on their long term paths to successful results.

For preservation of returns retirement portfolios need to be professionally optimized for the absolute lowest risk level possible to assure continuity of performance.

While a focus on long-term performance is important for all investors, it is mandatory for 401k account (TSP) investors. For them chasing short-term performance, or selling under the emotional stress of losses, is always counter productive. For such investors patience is always rewarded and impatience punished by a loss of hard-earned retirement funds.

While our high historical returns are obviously important, perhaps the major advantage of TSP Pilot is that it insures your peace of mind during those terrible long term down markets that always occur. TSP Pilot substantially insulates your TSP account from the devastating market losses that wipe out years of profitable contributions to hard-earned retirement accounts.

By keeping TSP stock fund positions at moderate levels even sharp and sudden corrections are easier to handle emotionally. The key is to be sufficiently comfortable with your portfolio levels that you aren't tempted to liquidate during sharp declines. Such emotionally prompted TSP account stock fund liquidations are almost always loss producing and ill-timed.

Following TSP Pilot is easy. We send you email notices to alert you every time a new recommendation is posted to our password protected Current Advisory Page. That page always lists the specific funds, balances and allocations that our systems have currently developed. Advisory recommendations are carried for all of the TSP funds including the new L Funds.

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