A.I.M. Users Bulletin Board

[OldAIMGuy]

HI JD, Re: TSP and AIM..............

The selections are a bit limiting, but not a real problem for a thrift plan. I think there are two options here:

1) AIM what you've already accumulated in the TSPs and
2) Twinvest each of the TSP components individually.

If you have already accumulated a sizable amount in one or all of those components you listed, then you could AIM them individually. However, if you're just getting started with the Thrift plan, then consider Twinvest (AIM's "thrift plan" cousin, chapt. 15, I believe). With Twinvest, you divide each month's (paycheck's) contribution into basically the "equity" and "cash" sides of Twinvest. You could use AGG as the cash side of each of the other components. (I'm assuming it's the aggregate bond index fund)

With Twinvest each period or however often you decide to re-direct your contribution (maybe quarterly?) you use the Twinvest formula to come up with the ratio being sent to the equity and cash sides. Initially 75% goes to the equity side with 25% going to the cash side. In your case, the cash side would be the agg bond fund. Next period, you review the equity cost/share of the index fund and determine the new ratio. If the index fund is "up" from where you started, it will reduce the ratio and send more to the cash side. If it is down from your starting point, it will contribute more to the equity side and less to the cash side.

The nice thing is that if it is way down from your starting point, it will send all of your contribution to the equity side and then "borrow" from your cash side to buy even more of the equities that are currently out of favor. So, in essence, you contribute 100% to the very low equity fund plus whatever Twinvest says you should transfer from the AGG side. You get excellent downward averaging with this method during market swoons.

Hope this helps. If you can't find the Twinvest formula, or don't have Mr. Lichello's book, take a look at
http://web.archive.org/web/20120609071154id_/http://www.aim-users.com/twinvest.htm
for further example and instruction.

Best regards,