Future retirement planning


Q. Starting about October 2008, I’ve read and heard opinionators state that based on the country’s poor economic situation and long-term market performance, e.g., the performance of the S&P 500 index over the past 10 years, that strategies, such as “buy and hold” low-cost, tax-advantaged, index funds such as TSP’s C, F, S, and I funds, “dollar-cost averaging,” and invest for the “long term”, are no longer valid ways to invest and save for one’s future retirement. Could you share your opinion on the whether we’re in a “new paradigm” (and what is it?) and whether the “average, unsophisticated investor” should continue to buy and hold, etc.? Also, if one continues to buy and hold equity funds like the C, S and I funds over the next 10 years, is there any general guidance regarding when, how often and how much to “take-off-the-table” from time to time?

A. As I’ve said many times in my Federal Times column and in the answers I’ve posted in this forum, the only investment management strategy that I endorse is to manage your TSP account like a pension fund — that is implement the lowest-volatility, risk/return-efficient asset allocation scheme that meets your needs, and then rebalance your account regularly to this allocation. Shift allocations only when a competent analysis demonstrates that you either need to take more risk to achieve your goals or that you may take less risk. The bottom line is that your TSP account should be managed specifically to meet your unique set of needs. One-size-fits-all investment strategies are inadequate substitutes for competent management. If they worked, you wouldn’t have had to ask your question.


About Author

Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

Leave A Reply