The value of indifference


Which way will the market, and the value of your TSP account, go next? If you’re like most investors, you are betting, and therefore hoping, that it moves higher. Or, maybe, lower. Either way, if you have a preference, then that preference makes you vulnerable — vulnerable to the risk of being wrong.

As much as you might tell yourself otherwise, the odds that the value of a share in the C, S, I or F funds will go up or down in the short run are about 50-50. If you’re betting that the C Fund will rise in value over the next six months, you might as well bet on the flip of a coin. You have something like a 50 percent chance of losing that bet.

So, what’s a concerned TSP investor to do? My solution: indifference.

Of course, I’m not indifferent to the outcomes that my investment decision-making produces. It’s critical that those outcomes are overwhelmingly positive. But I do try to position my client’s portfolios — and my own — so that I am indifferent to the direction of the next market move. I am always careful to make sure that I will be comfortable if the market goes up and comfortable if it goes down.

In fact, if you do it right, you shouldn’t really care which way the market moves over the coming day, week, month or even year. You know that your portfolio is invested aggressively enough to support your long-term financial goals and conservatively enough to weather the inevitable short-term losses.

In practice, this means choosing an asset allocation scheme that includes some stock, some bonds and some cash at all times. To get to the point of indifference, you’ll need to adjust the allocation as markets move. Shift away from the riskier funds after their value has risen and back into them after they have fallen.

This is not an all-or-nothing proposition, but an incremental rebalancing of your portfolio at least one but not more than four times per year. This process will tend to reduce market risk after markets have risen and increase it after they have fallen.

Hopefully, you see the logic in this. Knowing that your success doesn’t depend upon guessing the next market move will help you live better in retirement and sleep better until then.


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 and view his blog at

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