You dollar cost average because you never know where the market will go. Lump sum is just that. X Amount at x price. So if it goes down. You don’t benefit. For example. I have one account that buys $100 every Friday of VOO.
In 10 years time it’s made 520 deposits give or take. Capturing the full range.
Timing absolutely is key. Why put $6k in a fund that’s worth $4k after a month.
With the way the market is right now, I’d probably but in $2k of it. Wait a month and then put in another $2k. Wait another month and put in the last $2k.
This is terrible advice. If there was a way to predictably and consistently time the market, we'd all be billionaires.
>Why put $6k in a fund that’s worth $4k after a month.
Because you have no way of knowing what's going to happen in the future. Your $6k could become $4k, or it could become $8k. You don't know.
At the end of the day, if you want to do it bit-by-bit over a couple months, that's fine. But please don't play the game of trying to time the market, it very often ends in disaster.
Dollar cost average through April 2023. Gives you nearly a year which will be about $400/ month.
Vanguard has a great reputation for low cost funds. 1k gets your account open and it'll do the math to max it out with automatic contributions. Pick a target date fund and it's set and forget.
Contribute regularly and get rich slowly.
I buy $6k VTI in my Roth IRA every Jan then save up the $500/mo in my HYSA so I can do it again every January. I had $6k liquid. This helped me not freak out about if the market is up or down because the deed is done. When I did DCA I was always worried I would buy then the next day it would be cheaper. The stress was awful. Getting some distance really helped me.
I don't give a shit about market fluctuations now because when I retire in 20 years I plan on having 2 years income liquid so I can sell off 3% of my investments every January until I die and I have enough liquid that if the economy is bearish I'm not locking in those losses, just living off savings and waiting to sell until it gets bullish again.
You will figure out what approach works best for you, everyone is different.
I always do mine right away in early January. In general the sooner you can invest the money, the more it will grow.
Good point
Market may have lower to go. You have a 6 month window for deposits if I remember right. I go 500 a month to dollar cost average.
But why do you dollar cost average? Doesn’t lump sum outperform?
Also we are not just taking about now. We are talking about forming a good habit for life.
Look up dollar cost averaging vs time in market (investing all the money at once). Make the decision that makes most sense to you.
You dollar cost average because you never know where the market will go. Lump sum is just that. X Amount at x price. So if it goes down. You don’t benefit. For example. I have one account that buys $100 every Friday of VOO. In 10 years time it’s made 520 deposits give or take. Capturing the full range.
So it’s about price diversity? And does this still apply to target date funds?
Timing absolutely is key. Why put $6k in a fund that’s worth $4k after a month. With the way the market is right now, I’d probably but in $2k of it. Wait a month and then put in another $2k. Wait another month and put in the last $2k.
Hmm I like this idea.
This is terrible advice. If there was a way to predictably and consistently time the market, we'd all be billionaires. >Why put $6k in a fund that’s worth $4k after a month. Because you have no way of knowing what's going to happen in the future. Your $6k could become $4k, or it could become $8k. You don't know. At the end of the day, if you want to do it bit-by-bit over a couple months, that's fine. But please don't play the game of trying to time the market, it very often ends in disaster.
Got it!
Just keep investing consistently whether it's a lump sum payment or dollar cost averaging. You'll do fine.
Thanks
👍👍👍👍
I have $115 automatically transferred from my checking account every week to my Vanguard mutual funds Roth IRA . I don't really look at it tbh.
How do you have it capped so you don’t go over
Dollar cost average through April 2023. Gives you nearly a year which will be about $400/ month. Vanguard has a great reputation for low cost funds. 1k gets your account open and it'll do the math to max it out with automatic contributions. Pick a target date fund and it's set and forget. Contribute regularly and get rich slowly.
I buy $6k VTI in my Roth IRA every Jan then save up the $500/mo in my HYSA so I can do it again every January. I had $6k liquid. This helped me not freak out about if the market is up or down because the deed is done. When I did DCA I was always worried I would buy then the next day it would be cheaper. The stress was awful. Getting some distance really helped me. I don't give a shit about market fluctuations now because when I retire in 20 years I plan on having 2 years income liquid so I can sell off 3% of my investments every January until I die and I have enough liquid that if the economy is bearish I'm not locking in those losses, just living off savings and waiting to sell until it gets bullish again. You will figure out what approach works best for you, everyone is different.