		Helping you invest your way to paradise...

Introduction

Why is Timing Important for Investments?

Because any serious investor needs to time their investments - decide when to buy and when to sell - to get reasonable returns for reasonable risk. The only real question is which timing system to use. Timing-Science provides we believe one of the best stock market timing systems available.

What's Trend Timing?

Many investment advisors will admonish investors that you can't predict the market - and we agree. But you can, if you do the right data analyzes, determine the current "trend" of the market; that is determine whether the market is moving generally higher or lower, and similarly for funds or indexes of interest. This is what Timing-Science timing models accomplish - they don't try to predict the future, they just help establish the current trend of the market, and of particular funds and indexes of interest. With the trends established, advantageous portfolios can then be recommended accordingly.

Investment Funds

Five different funds, as chosen by the Government Thrift Savings Plan for federal employees are used for Timing-Science portfolios. These five funds are a government securities fund (G-fund), a fixed income bond fund (F-fund) which tracks the Lehman Brothers Bond Index Fund, a common stock index fund (C-fund) which tracks the S&P 500, a small capitalization stock index fund (S-fund) which tracks the Wilshire 4500, and an international stock fund (I-fund) which tracks the MSCI-EAFE developed country international fund. Corresponding Exchange Traded Funds (ETF's) and mutual funds for these five TSP funds are given in the table below.

TSP Fund	Description	Principle Features	Corresponding ETF's	Corresponding Mutual Funds
G-fund	Government Securities Fund	Safety. Low yield (3-5% per year) but no losses.	CD's (certificates of deposit)	FDRXX
F-fund	Bond Index Fund	Modest returns, somewhat better than Government Securities, with modest volatility. Often a good investment option for down market periods.	AGG	BTUSX
C-fund	S&P 500 Index Fund	Large company stock fund. Respectable returns for market growth periods. Medium volatility.	SPY	FSLVX
S-fund	Small Capitalization Stock Fund	Small and medium sized company stock fund. Good returns for market growth periods, but higher volatility.	VXF	FSMVX
I-fund	Developed Country International Stock Fund	Developed international country stock fund. Good returns for market growth periods, but higher volatility.	EFA	FIVLX
E-fund*	Emerging Markets International Stock Fund	Emerging international markets funds. Very good return for market growth periods, but fairly high volatility.	EEM	FEMKX
* - Not currently available for TSP.

Investment Returns

A very important consideration regarding investments is the return they generate over a period of time of interest. The table and chart below show returns for six different investment strategies for a seven year period starting December 31^st, 1999 and beginning with an initial investment of $100,000. The three Timing-Science strategies (TS) use trend timing and somewhat different portfolios for market up periods or so called "bull" periods. The first (TS-100S) uses all S-fund during bull periods, the second (TS-50S50I) uses a mixture of 50% S-fund and 50% I-fund, and the third (TS-75S25I Min) uses a mixture of 75% S-fund and 25% I-fund, and an approach which minimizes the number of trades required.

This can be compared with the returns from the three different buy & hold (BH) strategies shown. The first is a buy & hold for 100% G-fund (BH-100G). The second is for a buy & hold for a 50% C-fund and 50% G-fund (BH-50C50G), and the third is a buy & hold for the Government Thrift Savings Plan balanced life-style portfolio for a 2040 retirement date (BH-L2040).

Evaluation from 12/31/1999 to 12/29/2006
Initial Investment of $100,000
Investment Strategy	Final Investment Value	Aver. Yrly Return	Maximum Loss	Statistical Loss
TS-100S	$797,121	34.5%	-12.1%	-8.7%
TS-50S50I	$740,210	33.1%	-10.4%	-6.0%
TS-75S25I Min	$624,992	29.9%	-11.1%	-7.8%
BH-100G	$138,722	4.8%	0.0%	0.0%
BH-50C50G	$126,161	3.4%	-23.2%	-23.8%
BH-L2040	$126,513	3.4%	-40.7%	-50.1%
Results are from analysis of historical data. No explicit or implicit guarentee is provided for future results.

There are several notable items shown in the table above and the plot below. First, the TS timing models significantly outperform any of the buy & hold strategies, generating ~30% average yearly returns over this seven year period, compared to returns under 5% for any of the buy & hold strategies. In fact the best buy & hold strategy over this period is the 100% G-fund strategy, which generates a 4.8% yearly return.

Investment Loss

Return is one important consideration regarding an investment, and another is loss. This is a measure of the percentage decrease of an investment from its highest peak and provides a measure of the "risk" of an investment, complimenting the "gain" provided by the returns.

Losses, also referred to as draw-down, for the six investments strategies discussed above are shown in the plot below over the same seven-year time period. The lowest loss comes from the buy & hold 100% G-fund strategy (BH-100G), which has no or 0.0% loss - this is the principle benefit of guaranteed return investments, such as government securities; their returns are low, but that have no loss, and so no loss risk.

In contrast, both the trend-timing model and the other buy & hold strategies have non-zero losses. What is surprising to most people is that the timing model losses, which have maximum values of ~10-12% are considerably less than the losses for both the buy & hold 50% C-fund/50% G-fund (BH-50C50G) portfolio and the TPS lifestyle fund (BH-L2040) and over this period, which have maximum losses of ~23% and ~41% respectively.

These examples clearly show the benefit of "trend timing", to both significantly increase returns, while also limiting losses. A key consideration for the investor is to establish what level of risk, or loss, they can endure for their portfolios, and then look to maximize their returns for that level of risk. We believe "trend timing" provides a very attractive approach to achieving this goal.

Statistical Loss

Listed in the table above is another parameter: statistical loss. This is a statistical parameter that provides a better measure of the overall level of loss than the maximum loss value which relies on just one number (the maximum loss!). Specifically, statistical loss is the third standard deviation of the measured loss beyond its average value. It can be shown that this quantity gives a boundary where at least 89% of the values lie below - that is, at least 89% of the losses are less than this amount. It therefore provides a good indicator of the loss extremes for a particular investment strategy.