Hindsight is 20/20

No, you’re not going to make 30% every year by following a TSPcalc strategy.

The Seasonal Calculator has been accurately described as a “back-test engine”. In other words, a Hindsight Generator.

The Seasonal Calculator is not a crystal ball. Instead, it’s the opposite- the Seasonal Calculator can only look backward.

By optimizing trades for the past, we are hoping that those trends continue into the future. The trick is, trends are always changing.

Sears Roebuck and Co was founded in 1893 as a mail-order catalog company. Over the next 100 years or so, they grew into the largest retail giant the world had ever seen. Smart investors bought Sears.

In April 2007, Sears stock peaked at a value of $193. Today, a share is worth 20 cents. Consumer preferences, business models, logistics, and trends all change over time.

But by studying the past, we seasonal investors hope to capture “some of” the future trends. If hindsight is 20/20, then maybe our foresight will be 15/20.

Seasonal strategies that have seemingly done the impossible, and averaged >30% over the last 14 years, are not likely to continue doing that. Because I don’t have a crystal ball, I can’t say for sure what they will do. But most of us are betting that we will at least beat Buy & Hold (Namely, C fund/S fund). There is no guarantee.

The seasonal calculator is data driven, but the stock market is a complex beast. It’s your money that’s invested, so whatever investing strategy you choose is entirely up to you. Just understand the risks- your seasonal strategy may perform better or worse than simple Buy & Hold. This is the entire reason why having a community of like-minded investors is so important. Because we learn from each other’s thinking.

When I built this tool in May of 2017, it was built for TSP investors who were already familiar with seasonal trading. It was intended for a small niche community of people who already understood the risks. For that reason, the amount of guidance provided on TSPcalc has always been pretty much zero. A TSPcalc strategy is not going to be a golden ticket to consistently huge returns. Personally my goal is to beat Buy & Hold by an average of 1% per year. And I have accepted that I will not beat Buy & Hold every year- sometimes I will lose. But I am betting on data that I will win more than I lose.

The “Seasonal Blind Tests” are tests that I ran to get a feel for how well the TSPcalc data can predict the future. The tests work by splitting our available data (2004 – present) into two different time frames (example: 2004 – 2010; 2011 – present). Data from the first time frame is used to build a strategy, and then it is tested on the second time frame. When done correctly, the test is “blind” because it was not informed in advance by the performance of the second time frame. This kind of testing can tell you how well a methodology works.

Warning: You cannot run a blind test on the “Seasonal Strategies” table. It will not be truly blind. You must use the Seasonal Builder to do this kind of testing.

The Blind Test page is difficult to understand, I get that. I have tried to make it simpler and I can’t. But the data there shows us that some methods work, and others don’t.

TSPcalc is very much a choose-your-own adventure. For the first time this year I published “featured strategies”. But it is intended to be a tool, to be used by people who are comfortable with the concept. If you feel overwhelmed, then I’d suggest skipping Seasonal and instead Buy & Hold in the C & S funds. That’s not a bad strategy- in the long run, buy & hold with those two funds has averaged at least 7% per year.