Tactical Thrift

How it works

This is a TSP investment model based on Mebane Faber's paper, A Quantitative Approach to Tactical Asset Allocation. Faber describes an investment system that is based on comparing the current price of a fund to the 10-month simple moving average (SMA) of that fund, and making a buy/sell decision based on that comparison.

Applied to the TSP, this means we watch the C, S, and I funds. If the price of any of these funds drops below its 10-month SMA, we move money from that fund to the G fund. Conversely, if a fund's price rises above its 10-month SMA, we move money from the G fund to that stock fund. You decide how much of your investment you want to allocate to each fund. The F fund and the L funds are not a part of this model.

Faber's model only looks at the prices once a month after the final trading day of the month. This is a perfect fit for the TSP since we are only allowed two trades per month plus one move to the G Fund per month.

I originally learned of this model from a Federal News Radio article, which describes in detail how Faber's model can be applied to the TSP.

If you are considering following this model for your investments, there are a few things you should keep in mind:

• Everyone's investment needs are different. This model may or may not fit your needs.
• I am just a human pounding away at a keyboard. Humans make mistakes. You should verify the numbers for yourself rather than relying on my calculations.