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Saturday, January 22, 2011

I Just Rebalanced My TSP Account...and Maybe You Should Too...

I'll be honest, it wasn't an easy decision to make. I'd watched my Thrift Savings Plan account double in value after a perilous decline in 2008. I'd been true to my "stay in the market" philosophy, and it had paid off.

And now I was moving some of my TSP account into cash.

Was I market timing? Heck no. I don't believe in it.

Was I getting nervous? Nope, sleeping like a baby.

Did I think the market had topped out.

I think we'll keep going up...in the long run.

So why was I rebalancing my account? A lot of it has to do with Mr. Ray Lucia. His syndicated radio program (and free webcast) has been talking a lot lately about managing expectations and "scraping the cream off the top" after this great run up in stock prices. He's also been a proponent of "value averaging" where you take money out of your long term investment portfolio when you exceed your targets, and add it back when you undershoot your goals.

I had exceeded my expectations by a factor of about 5, and thought it was time I take some money off the table.

So, I calculated what I could start taking out of my account if I stuck to a 4% rate of withdrawl, and moved 15 years of money into the TSP G and F funds. The rest of my nest egg I left in the C, S, and I funds, stock funds that will continue to fluctuate with market conditions. Next year at this time I'll review the stock portfolio performance, and if it exceeds my target rate of return, I'll scrape a little more off the top. If it underperforms, I move money out of the G and F funds and add it to the stock funds.

In this way I'll buy low and sell high, even if it isn't what I want to do at the time.

Stay tuned to see how I do...

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