Saving Money Isn't Enough
The first saver is a hard worker who understands the value of time and the importance of savings. They have diligently saved their money for so long it has simply become a habit. When starting their career they choose to invest $2,000/year of their savings in a conservative way by opening a retirement account at work to avoid taxes on their investment.
This saver isn't worried about "getting rich." They're just saving money. And it's easy because they've chosen a modest amount to save which leaves them plenty to spend on things they need and want. But they remember to save first.
The other saver...
This saver doesn't learn to save at a young age, they get a job after college and have a career. But by that time, they're so busy buying things, paying off debt, and living their lives - cars, vacations, student loans, child care, clothes, houses, etc., they can never "afford" to save a dime.
At age 35 they suddenly realize they don't have a substantial sum in their retirement portfolio or any real liquid savings at all. So they begin to save, and they do a great job. They're socking away $10,000/year. They know they're playing "catch up."
Some may argue the first saver has the advantage due to their earlier start while others can argue the second saver is investing more money. Both arguments carry merit but are forgetting a key metric in their analysis - investment returns.
Chances Are You're A Lousy Investor
Now, with that ugliness in the open, let me tell you why it's true and how you can easily overcome the herd mentality that causes most of the trouble...
DALBAR is the nation's leading financial services market research firm and performs a variety of ratings and evaluations to include investor behavior analysis. Since 1994 this firm has been measuring the effects of investor decisions to buy, sell and switch into and out of mutual funds over both short and long-term timeframes. The results have consistently shown equity mutual funds have gained about 9% a year on average since the study began 20 years ago, when the actual annual return earned by the average investor was only 3.2% – which didn't even cover inflation in the period.
"Recommendations by many mutual fund companies to remain invested have had little effect on what investors actually do. The result is that the alpha [positive return] created by portfolio management is lost to the average investor, who generally abandons investments at inopportune times, often in response to bad news."
The core reason most people can't succeed with their investing isn't because they don't know how, although that's certainly a factor. It's mainly because they don't consider or manage the emotional toll of having their savings at risk. In our experience, unless you're able to formulate a clear plan for your investing – a plan that's logical and based on proven historical research – you are unlikely to succeed.
Here’s The Absolute Truth About Investing
We’re not experts and have never claimed to be. In fact we are probably one of the very few investment newsletters that openly admit we have no clue what the market will do next. It certainly loses us a lot of potential customers but it’s the truth and as the cliché goes… “The truth shall set you free!”
Think about it for a moment, if an individual or firm knew exactly what a stock or the overall market was going to do, then why in the world would they tell you?! Why in the world would they expend the amount of resources they do trying to convince you to buy their services?? We certainly wouldn’t put up with the hassle of customer service, marketing, and producing an investment product. We’d simply sit back and get rich, seeing as we had a crystal ball.
Sounds pretty ridiculous right???
That’s because it is absolutely ridiculous!
Listen, we wish we could give you a 30 second elevator pitch or write some convincing sales copy explaining the depth of investing to your satisfaction, but it’s just not going to happen.
A carpenter to explain “do-it-yourself” tasks in 5 minutes or less.
Fundamentally understanding investments begins with an individual seeking knowledge. Once they seek knowledge then they can begin their journey towards education. Investment education is the core principle of our newsletter. Yes we have our flagship indicator that has been backtested thoroughly and proven but that’s not what separates us from others. Giving our subscribers the ability to think and grow on their own is what sets us apart. And we believe that is far more valuable than any investment system.
How Our Method Increases Your TSP Portfolio Significantly
Our system takes a simple, technical, and time efficient approach to investing in the Thrift Savings Plan.
All too often individuals and advisors believe they should be jumping in and out of funds in order to properly capitalize on market movements and I'm here to tell you that couldn't be any further from the truth. As of now our system utilizes only two of the funds offered in the TSP:
The G Fund - Acts as a money market account earning less than 1% return annually but preserves the capital that you contributed.
The C Fund - Aimed at mimicking the performance of the S&P 500.
With these two funds we conduct what is called "Trend Following." In short, we are primarily concerned with the technical performance of the market and less concerned with the fundamental aspects of the market. I know this may sound very "technical" and hard to understand but believe me it's not. You will see how simple it is in a moment.
With our trend following mantra we are able to identify when the market will rise and when the market will fall. This in turn helps us capitalize on gains and avoid catastrophic loss to our portfolio - You may remember the two most recent stock market crashes of 2000 & 2007.
Individuals who stayed fully invested in their portfolio's suffered catatrophic losses during both time periods. Each crash resulted in approximately a 50% loss of their portfolios - In order to recover from such a loss you would have to turn around and generate a 100% gain (not an easy task). Think about it this way, if you had $100 and it was cut in half you would be left with $50. In order for you to get back to $100 - You would need to generate $50 just to get back to where you started! I have no problem with working hard, I've worked hard my entire life, but this phrase rings true.... "Work smarter, not harder"
If you knew you were about to suffer a huge potential loss to your $100...
- Would it make sense to protect your capital?
- Would it not make further sense to step aside from the carnage that was about to ensue then simply return to the market when conditions were favorable?
- Would it be in your best interest to invest $100 at the start of a new bull market instead of $50?
These are questions - We don't have the answers for you.
But if you answered yes to all the questions above, then you will understand 100% why our system is vital to your retirement future.
As stated before, our system identifies bull & bear markets. This allows us to notify you at the beginning of every month through our newsletter and tell you what our system is indicating. This system tells us where to keep our capital and where to allocate future contributions to the TSP. It is remarkably quite simple:
When the S&P 500 is trading above our trading signal - We place all of our capital into the C Fund and allocate future contributions to the C Fund
When the S&P 500 is trading below our trading signal - We place all of our capital into the G Fund and allocate future contributions to the G fund. There is one exception to this rule but it is a little confusing and technical therefore we won't address it until the situation presents itself.
It really is that simple! Take a look for yourself...
Do you see how simple this system is? The best part about it, is you only have to take action whenever there is a huge market swing. You won't have to check your TSP every day, every week, or every pay period. You can sleep at night knowing your road to retirement is clear and profitable!