[TSP_Strategy] Re: Is this the bounce?

 

LadyDevil33 wrote

I have always considered it buying low and often raise my contribution during difficult times when I can. How long do the "experts" think it will be before a turnaround? I am way behind in my retirement planning, because I came into the work force late and the government even later. I really need to maximize my returns.

On the flip side, I could reduce my contributions and actually pay off more debt as well. Right now, it's a balancing act....


Geri,

What caught my attention is you stated that you behind in your retirement planning and "really need to maximize my returns".  You are not alone, but please don't fall prey to the view you have to be "invested" in to maximize your long-term returns.  Bear markets can quickly wipe out most or all of the previous bull market gains.  My view is too embrace the bear market since it will reset the market valuations to much lower levels at which to re-enter.  Lower valuations ensure higher returns in the future.  In the meantime, the G fund offers a low but safe 2% return. 

As for paying off debt verses investing?  I do not know your exact situation, but generally I would recommend investing in TSP up to matching contributions first (an immediate 100% return), pay off high interest loans next, and then decide between paying off non-mortgage debt and additional TSP investments.  All assuming you have a small emergency fund set aside.  Since we are in a bear market, you have some time to pay down the debt and hopefully that gives you more to invest when market valuations are lower.

I am not sure who you define as the "experts" but of course the opinions are all over the place about a turnaround.  I spend much of my time reading the opinions of those I have come to respect in the financial world.  I also skim the mainstream media.  The consensus is shifting to a bear market, but everyone adds the caveat we could have a bounce anytime from oversold conditions.  But bear markets can become oversold and then become more deeply oversold and stay there longer than expected, so this is not a reason to jump in.

Bull markets usually rise slow and steady and have quick rapid corrections.  Bear markets can have quick rapid rallies before rolling over into what I call waterfalls where the market falls rapidly through the last low when you look at long term charts.  I've studied the price progression of the bear markets following the 1968, 1973, 2000, and 2007 market tops compared to the current one.  Why these?  Because of the size of the preceding bull market.

In all cases the market barely hesitated at previous lows when falling off its right shoulder as we are today.  What makes this bull different is the recent low also corresponds to the Oct 2014 low at the same time we are hitting the lowest trend line in the SP500 based on the 2011 correction lows.  So now would be the expected time for some sort of bounce off of technical support, but a full bear market rally is not guaranteed.  What we continue to see is selling into every little rally.  The market is searching for a reason to rally and has not found it yet. 

Just my humble opinion. I am sure there are others.

Michael (TSPsmart.com)

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Posted by: Michael Bond <michaelhbond@yahoo.com>

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