Thursday is the day that about 600 Federal employees who invest in the Thrift Savings Plan hoped would never come. Starting May 1st, each TSP account holder will be allowed two interfund transfers per month. After those two trades each month, you’ll only be able to move money INTO the G fund.
This change has been talked about for months, and comes after the TSP Board looked into how other retirement investment plans handle frequent trading. The comments the Board received ranged from consternation to outrage, with some going so far as to question the competency of the Chief Investment Officer Tracey Ray.
Which makes me wonder: why get yourself all in an uproar? Why lob incompetence charges at TSP employees who have been universally praised in the financial management world? What makes you smarter than John Bogle anyway?
John Bogle invented the index fund and founded Vanguard, universally regarded as the pioneers of low-cost investing. Bogle told Mike Causey and me on Your Turn last year that the Thrift Savings Plan is the best-run, lowest-cost investment plan out there. One would think he knows a thing or two about investing. (By the way, Warren Buffett has said he thinks market timing is crazy too—but he’s never said it on Your Turn.)
The list of financial experts who go on and on about the TSP and its management would fill the server this blog is hosted on. Meanwhile, a couple hundred dead-enders who aren’t yet good enough at “day trading” to quit their government jobs fuss about their TSP accounts being limited to two interfund trades a month. The main argument they make is, “it’s MY money, I should be able to trade it however I want.”
You’re right. You CAN trade your money however you want. There's no law that says you have to have it in the TSP in the first place. So here’s an idea. Take all your money out of the TSP, put it into a brokerage account, and trade your fingers off. If you’re smarter than the TSP, what do you need them for anyway?
And by all means, show all of us less-financially-gifted folks your money prowess. Prove to us how much smarter you are than the rest of us. E-mail me your numbers that prove how much greater you’re doing because of frequent trading than the let-it-ride investors. I’ll post them here, and we can all recognize you for the expert that you are.
But do us all a favor. Leave the TSP for people who want to use it for what it was intended for—for what Congress says it’s supposed to be for—Federal employees who want a long-term investment vehicle, run well at low cost. After all, it’s THEIR money.
