Re: Fund Cash Flow vs. C Fund Performance


May 23, 2008

 


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#9460 May 23, 2008

Net Equity Fund Cash Flows vs. S&P 500 Index PerformanceChart of the Week for May 23, 2008 - May 29, 2008Market timing is a difficult task in any period. In fact, a famousstudy by Nobel laureate, William Sharpe, stated that market timers hadto be correct over 70% of the time when predicting market swings tomatch the returns of a passive investor. To get a perspective on thesuccess of market timing, we examined monthly equity mutual fund netcash flows as reported by AMG Data Services and the monthly returns onthe S&P 500 Index. Positive net cash flow means more money isbuying into equity funds than selling and negative net cash flows isthe opposite. Is net cash flow positive when the market is going down(buy low) or when the market is going up (buy high)? Is net cash flownegative when the market is going down (sell low) or when the market isgoing up (sell high)?Too often it appears that cash flow is following the buy high selllow path. The natural inclination to flee equities in times of negativeperformance is evidenced by the negative cash flow in January, July andSeptember of 2001. More recently, January 2008 saw a similaroccurrence. Conversely, positive cash flows to equities largelyoccurred in times of positive index performance; 2003 to early 2007.The historical measure above provides evidence that many investors timethe market to buy high and sell low. A long-term investment strategyrequires patience and discipline. Consider your long-term strategy whenshort-term jitters raise anxiety levels.



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#9479 May 25, 2008

It amazes me how every time I am getting close to the Aug 07 account balance the market drops before I can get out and take a breather.�� Maybe it is better this way.�� Just stay in till elections over.�� By the way, when you plan on working 7 more years, what amount in each fund is recommended?

Thanks

--- On Fri, 5/23/08, Sarah sarah_oz@...> wrote:From: Sarah sarah_oz@...>Subject: [TSP_Strategy] Fund Cash Flow vs. C Fund PerformanceTo: TSP_Strategy@yahoogroups.comDate: Friday, May 23, 2008, 9:04 PM

Net Equity Fund Cash Flows vs. S&P 500 Index PerformanceChart of the Week for May 23, 2008 - May 29, 2008Market timing is a difficult task in any period. In fact, a famousstudy by Nobel laureate, William Sharpe, stated that market timers hadto be correct over 70% of the time when predicting market swings tomatch the returns of a passive investor. To get a perspective on thesuccess of market timing, we examined monthly equity mutual fund netcash flows as reported by AMG Data Services and the monthly returns onthe S&P 500 Index. Positive net cash flow means more money isbuying into equity funds than selling and negative net cash flows isthe opposite. Is net cash flow positive when the market is going down(buy low) or when the market is going up (buy high)? Is net cash flownegative when the market is going down (sell low) or when the market isgoing up (sell high)?Too often it appears that cash flow is following the buy high selllow path. The natural inclination to flee equities in times of negativeperformance is evidenced by the negative cash flow in January, July andSeptember of 2001. More recently, January 2008 saw a similaroccurrence. Conversely, positive cash flows to equities largelyoccurred in times of positive index performance; 2003 to early 2007.The historical measure above provides evidence that many investors timethe market to buy high and sell low. A long-term investment strategyrequires patience and discipline. Consider your long-term strategy whenshort-term jitters raise anxiety levels.



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#9480 May 26, 2008

The TSP would say that you should invest in the L2020 fund.



I would say that it depends upon your level of risk and willingness to

track your investments.



--- In TSP_Strategy@yahoogroups.com, William Anderson rureal4sure@...>

wrote: >

> It amazes me how every time I am getting close to the Aug 07 account

balance the market drops before I can get out and take a breather.��

Maybe it is better this way.�� Just stay in till elections

over.�� By the way, when you plan on working 7 more years, what

amount in each fund is recommended? >

> Thanks

>

> --- On Fri, 5/23/08, Sarah sarah_oz@...> wrote:

> From: Sarah sarah_oz@...>

> Subject: [TSP_Strategy] Fund Cash Flow vs. C Fund Performance

> To: TSP_Strategy@yahoogroups.com

> Date: Friday, May 23, 2008, 9:04 PM

>

>

>

>

>

>

>

>

>

>

>

> Net Equity Fund Cash Flows vs. S&P 500 Index PerformanceChart of

the Week for May 23, 2008 - May 29, 2008 >

> Market timing is a difficult task in any period. In fact, a famous

> study by Nobel laureate, William Sharpe, stated that market timers had

> to be correct over 70% of the time when predicting market swings to

> match the returns of a passive investor. To get a perspective on the

> success of market timing, we examined monthly equity mutual fund net

> cash flows as reported by AMG Data Services and the monthly returns on

> the S&P 500 Index. Positive net cash flow means more money is

> buying into equity funds than selling and negative net cash flows is

> the opposite. Is net cash flow positive when the market is going down

> (buy low) or when the market is going up (buy high)? Is net cash flow

> negative when the market is going down (sell low) or when the market

is > going up (sell high)?

>

> Too often it appears that cash flow is following the buy high sell

> low path. The natural inclination to flee equities in times of

negative > performance is evidenced by the negative cash flow in January, July

and > September of 2001. More recently, January 2008 saw a similar

> occurrence. Conversely, positive cash flows to equities largely

> occurred in times of positive index performance; 2003 to early 2007.

> The historical measure above provides evidence that many investors

time > the market to buy high and sell low. A long-term investment strategy

> requires patience and discipline. Consider your long-term strategy

when > short-term jitters raise anxiety levels.

>







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