Hi Jim,
I'm not sure all the damage is in for the summer. In 2010 after a 9% drop, the S&P 500 bounce and recouped two thirds of its gains in 3 days. It then rolled over to deeper losses. Yesterday was the third day of a rally. Hopefully, this does not happen again for you but it could and I think it will be a volatile summer.
As for the moving averages, most technical indicators to include moving averages are really just momentum measures that attempt to eliminate the noise from actual changes in the direction of the market. Sometimes they work great, but sometimes the market punishes these indications by oscillating just enough to reverse direction right after your indicator signals a change. In other words, it gets you to sell low and buy high.
The C, S and I fund are positively correlated. Frankly most of the markets became positively correlated when the central bankers started their liquidity operations. I do not think this correlation will change when the markets turn down. When the US markets turn down, so will the I fund markets.
I am not a fan of the L funds since they maintain 100% exposure to the markets no matter what. But if you are looking for a guide as to how much exposure you should have based on your age (relative to retirement), you could look at the L fund most closely aligned to your retirement date and see what percent they allocate to equities verses F/G fund.
I have found other Lifecycle funds allocation diversification do different significantly from the TSP L funds, so there is no perfect answer and everyone's situation is different. I do highly recommend finding a fee only independent and certified financial planner to provide a tailored plan for everyone from time to time.
I would also use these same L funds as a benchmark for how you are doing instead of the C and S fund returns. Comparing your returns to 100% allocation levels is inappropriate since this is a higher risk level than most investors with large accounts and near retirement should hold.
Since my strategy mitigates about 50% of the market risk, I suggest that one could hold a bit more than the L fund relative to your age while invested. The strategy is designed to capture most of the gains during the favorable season for equities and avoid the stress and market downdrafts during the unfavorable season. And, of course, let's stay away from bear markets.
My two cents for the day,
Michael
Posted by: michaelhbond@yahoo.com
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