SO EXACTLY HOW MUCH WILL

THE PROPOSED TRADING RESTRICTIONS SAVE?

Taking away freedom always has a price.

And, according to the Thrift Board, stopping people from controlling their own money is their idea of providing for the greater good of the 3.8 million TSP participants. 

But we question that. We only have to look at November 2007, to see that the impact of restricting people from controlling their own money would have devastating impacts.

                          NOVEMBER RATES OF RETURN:

      C Fund                     S Fund                             I Fund

          (- 4.20%)                 (-5.65%)                           (-3.72%)

For the month, those who were actively monitoring their own investments were able to move quickly to the sidelines, and escape the downward plunge of the markets. The Board recommends holding on and losing money. We advocate that an educated TSP Shareholder is in the best position to monitor and move his or her own assets.

To put things into perspective, TSP Chief Investment Officer  Tracey Ray has advised the TSP Thrift Board that moving money means there is some kind of a financial emergency, because some employees desire to move their money more frequently than she believes is necessary.

 We believe that is just her opinion, and we disagree.

"Buy and Hold" is ONE theory of how to invest one's money.

Dollar cost averaging, or swing trading, are both investment styles that the millions spent by TSP Shareholders a few years ago bought the capability to exercise.

We, the share holders of TSP, bought that capability. 

And now Ms. Ray says we have to give up our investment in that technology.

She wants to limit the freedom to pursue individual investment options, to go back to a limited number per month restriction. She says we shouldn't have the freedom to control our own money. She says that taking our freedom away will save shareholders money overall.  

But she hasn't said how much such a restriction would save the TSP shareholders.

That is an important question that hasn't been answered.  How much will the vast majority of TSP's 3.8 Million shareholders "save" by invoking Draconian trade limits? 

And who exactly does the Thrift Board think are being harmed by continuing to have the ability to control one's own money?

First, it's NOT those who sit in the "G" fund with all their retirement cash. The "G" fund now represents some 33% of the total assets in the TSP, at $76,758,000 dollars as of the end of September, 2007.  If someone is a pure "G" funder, they gain nothing at all from the proposed imposition of trading limits.

And it isn't holders or traders of the "C" fund, as C fund holders now represent 34% of all TSP assets, and trading costs in the C fund are less than 1 basis point, or 10 cents for every $1,000 invested.  Those who hold the C fund aren't making any gain by limiting trades.  Maybe a dollar a year, if that.

Could it be the L funders who are "harmed"?  Some 500,000 employees now place their funds in the L funds.  That's a very wise choice for many people.  Those who cannot or will not learn how to make a better return on their own invest in the L funds.  We support that. But if a typical L funder (L2020 is the largest holdings at 39% of FERS employees holding shares of the L2020) only has a small percentage of his/her account invested in the I fund, which is the fund being cited by Ms. Ray for high costs.

By the way, the L2020 only has 18.1% of it's assets in shares of the I fund as of September 2007. Which means, on an average $70,000 L2020 account balance, means only $12670 is exposed to the I fund.  It also means, that if you left the money alone, as Ray and the Thrift Board suggest, you would have lost -2.33% of you money in November alone. That is a loss of $1633 dollars in November if you simply "bought and held".

Would limiting trades save money?  We don't know for sure. Tracey Ray has not made a public estimate of how much of that 6 basis points she thinks will be saved by limiting trades.  How much? She won't say. She thinks it will save money. 

 We're not so sure.  In fact, our data says exactly the opposite, and we'll show you OUR data in our next newsletter.

Since she won't put a figure on any estimated "savings" by limiting trades, We'll have to make up a figure, just for demonstration purposes.

That's .000025 percent.

On $12,670 exposure to the I fund, that means "trade limits" COULD save a whopping .31 cents for the month.

That same "L funder" person, by not being able to trade, would have "saved" about 31 cents.   And lost a fixed amount of $1632.70 in November, by not moving to safety.

But if they had "managed their own money", and bought L2020 on November 1, sold on November 6, bought on November 19^th, and held till the end of the month, they would have made  $2,009.59 in profit.   On just three trades in a month. Three is above the limit that the TSP Board is proposing.  

Is it worth saving 31 cents, to give up the ability to make $2,009.59?  

It is, under Tracey Ray's math.

She says restricting the ability of a person to control their own money and saving 31 cents is more important than allowing a person the right to control their own destiny.

While it is true that not everyone can pick the highs and the lows of the market, anyone who manages their own money can make an educated guess of the direction of the market's travel.  And can judge their own level of risk and reward, to determine if they want to be in the markets, or out. 

We believe in education.  We believe in the importance of sharing knowledge with our fellow employees, about how they can take control of their own futures, and make their money work for them. We want people to have a better future for themselves.

We believe it's better to teach a person about finance, than to let them suffer in the dark. Education and information can transform lives.  That's why this freedom is needed.

And we believe Tracey Ray, and the Thrift Board, are missing the big picture.  It's not THEIR money at risk.  They need to stop frightening TSP shareholders by claiming that the costs to their accounts are being damaged. It's simply not true. It's not hurt any of the "G" funders at all. And it's cost less than $4 per year per person overall to maintain freedom, less than the costs of compiling, printing, and sending out yearly statements to members.

Remember, for a $70,000 L-2020 account holder in November, limits MAY have saved him perhaps .31 cents. 

And cost them the freedom and opportunity to gain $2,009.

TSP Thrift Board needs to understand that.