Author Topic: Averaging out IRA or lump sum?  (Read 1303 times)

MoonLiteNite

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Averaging out IRA or lump sum?
« on: August 02, 2016, 03:13:06 AM »
Never thought of this before, as i normally throw in a lump sum and then average out the rest to top it off.

Would it better to just average out IRA throughout the year? Just so you get a good mix of the year's rates? Or is it better to just throw it it all in on one day and hope you don't buy at the top, and rather near the bottom?

I am sure there is a way to figure this out with math and historical numbers, but i am not smart enough to do it :)

ender

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Re: Averaging out IRA or lump sum?
« Reply #1 on: August 02, 2016, 06:22:54 AM »
Lump sum is mathematically better.

Averaging is emotionally better for some.

Spitfire

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Re: Averaging out IRA or lump sum?
« Reply #2 on: August 02, 2016, 07:38:49 AM »
Lump sum is mathematically better.

Averaging is emotionally better for some.

This.

If you do choose to invest smaller sums during the year, make sure you stick to a schedule (say $500/mo for 11 months or something) and don't try to time it.

ooeei

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Re: Averaging out IRA or lump sum?
« Reply #3 on: August 02, 2016, 08:39:56 AM »
Never thought of this before, as i normally throw in a lump sum and then average out the rest to top it off.

Would it better to just average out IRA throughout the year? Just so you get a good mix of the year's rates? Or is it better to just throw it it all in on one day and hope you don't buy at the top, and rather near the bottom?

I am sure there is a way to figure this out with math and historical numbers, but i am not smart enough to do it :)

If you're doing the same thing every year, just do the lump sum.  You'll be "dollar cost averaging" over a decade instead of a year, and will get those mathematically better returns referenced above.

Radagast

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Re: Averaging out IRA or lump sum?
« Reply #4 on: August 02, 2016, 08:47:45 AM »
I do mine divided out evenly every month for cash flow reasons. If you will be investing it in the same fund in a taxable account anyway I doubt it will make much difference. But in general yes, sooner is better.

MoonLiteNite

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Re: Averaging out IRA or lump sum?
« Reply #5 on: August 03, 2016, 01:35:42 AM »
Thanks everyone!
About what i thought, as i have comment myself on other posts. Never "time" your first  big investment, just do it!

But i guess the same applies for using an IRA.
I'll go ahead and top off my 1000$ more right now... or should i wait for.. na just kidding:D

mathjak107

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Re: Averaging out IRA or lump sum?
« Reply #6 on: August 03, 2016, 03:58:07 AM »
since  historically markets are up 2/3"s of the time and down only 1/3 odds are lump sum is better .

if dollar cost averaging was typically better we would all hit our desired allocation , sell off everything and start from zero again .

you can see that would not likely work out well at all .