The market is bouncing. Today should be an up day. My recommendation is to sell into strength.
I am 100% in the G Fund. Barbara has received her e-mail.
Market conditions are very volatile, given the events in Japan. I have seen this movie before. A healthy market is quiet and just keeps going up with minor pullbacks. Remember how the market acted in September and October of 2010? We had a steady climb with the market making higher highs seemingly every day. Those are great conditions for the C Fund. However, when the market changes and goes through a transition, we see the volatility increase. Yesterday was a case in point. A Bull Market shrugs off bad news. A Bear Market doesn't. In the morning yesterday, some faceless EU guy made a comment and the market dropped within ten minutes to the previous day's low. That behavior is of a market changing its character.
It also struck me with great force that the market dropped yesterday to 1249. 1249 represents the lower trend line of a broadening top pattern. It meant a high risk of lower prices ahead after Friday. I was not willing to take that chance.
Unfortunately, once you are caught in a downdraft, the best thing to do is to sell into strength because no one can say how far the market might drop the next time around. Hoping for the market to turn around is not a plan. Selling into strength is a plan. The great trader Marty Schwartz once said that you must take action if you are taking enemy fire. You can't freeze up. Similarly, the S&P 500 Index has dropped from 1344 on February 18 to 1244 yesterday. That is enemy fire. It is time to take action. Another sign was March 1. The market had been going up every first of the month. But on March 1, the market dropped. When the market changes its behavior, this is another sign that the market is changing.
Anyway, I am happy to be out. It's a good time to just step aside and let the market do it's thing.
I also remain convinced that late May will offer the buy opportunity of the year. If the market reaches a good low in late May, then we will be able to beat the S&P by year's end with ease.
I also expect a market low on Tuesday, March 22, 2011.
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How does the S&P's announcement that they may downgrade the US Government's debt outlook impact the G Fund. Could the G Fund lose money??
ReplyDeleteAmy,
ReplyDeleteI am just catching up with old comments. I apologize for my late reply and thank you for your patience.
I hope that a possible downgrade of the U.S. Government's debt outlook would not impact the G Fund because I believe that Congress and the President will resolve the debt ceiling debate. My position is based more on a fear of the consequences than hard research. I will research the question and get back to you.
If a downgrade would tank the G Fund, then that would be a nightmare scenario. The G Fund is designed to be the safest of havens for investors. If a downgrade happens and the G Fund tanks, then you would have to imagine that the C Fund would tank as well. There would be no safe haven or protection from a decline in portfolio value.
The real solution is to provide a greater range of funds in the TSP system. For example, I am amazed that there is no fund devoted to precious metals. Silver and gold have been on a tear since 2000. These sectors have outperformed the S&P 500 Index and, yet, there is no option for government employees to take advantage of this sector for retirement funds. Another desirable option would be foreign currencies. Did you know that the U.S. Dollar has been falling for a long time while the Swiss Franc and the Australian Dollar have been rising in value? Shouldn't government employees have the option of parking their retirement money in appreciating currencies if they so desire? Similarly, even plain old U.S. Dollars would be better than the G Fund in a debt default situation. Yet, we do not have that option as members of the FERS system.
Anyway, I will research your question and try to provide a strong answer. Once again, thank you for your patience.
Wink
If your in the C-fund, just stay in it for the long haul, & it'll outperform all the other funds, & even if the market is a bit shaky, stay in the c fund, & when it comes back up, you'll double your money!!
ReplyDeleteAlso as warren buffet, & john bogle always say, that with an index fund-
ReplyDeletec fund, over a long period of time, the index fund will outperform a hedge fund or any other fund to!!