Betterment Transfers: Daily, weeckly, monthly...???

[mthrasher16]

Hi All,

I tried figuring this out on my own, but all the internet investment calculators give wildly different results, so hopefully you can help!

I have a job that pays weekly and with each paycheck I deposit $500 into Betterment every Friday.  Since Betterment charges no fees to deposit and invest funds, I was wondering if it would be worth my wild to, rather than deposit the $500 as one lump sum weekly, set-up auto-deposits for each day of the week of $100.00. 

The static criteria I'm using are:  Initial deposit = $5,000.00, Interest Rate = 7.9%, Compounded Quarterly, saving for 10 years. 

Investing $500/week yields $401,424.00
Investing $100/daily yields $559,000.00

That's a huge difference!  I can't tell if the calculator is assuming a 7-day week...if  that's the case then it's artificially increasing my  contributions.

But, could cost-averaging really increase returns this much?!  Thoughts?

Thanks!

[Slowdown]

Hi mthrasher16,

the calculator is definetely assuming a 7-day week.
To approve this, try the weekly calculation with 700 . I guess, the result will be very near to 559,000.00.

[Slowdown]

One more hint:

If you invest the 500 $ in 1-day-portions the week after you received them, you will earn the interest for
100 on day 1
200 on day 2
300 on day 3
400 on day 4
500 on days 5, 6 and 7.

If you invest the whole 500 $ on the day you receive them, you will earn the interest for
500 $ on days 1, 2, 3, 4, 5, 6, 7.

Which is definetely more.

Cost averaging will not increase your expected returns, it will reduce your risk.

[GGNoob]

I agree with what Slowdown said. Just deposit the money as soon as you can. You are already getting plenty of dollar cost averaging by depositing money weekly. Plus, these daily fluctuations right now won't matter much in the long run.

Since you are depositing $500 a week, I know this must be going into a taxable account. I just wanted to check and make sure...are you maxing all of your tax advantaged accounts first (IRAs, 401k, 457, HSA, etc.)?

[kpd905]

Since you are depositing $500 a week, I know this must be going into a taxable account. I just wanted to check and make sure...are you maxing all of your tax advantaged accounts first (IRAs, 401k, 457, HSA, etc.)?

+1, make sure you do this first.  If you can afford to deposit $500 a week, you probably have a relatively high tax rate.

[Nannooskeeska]

I've been struggling with the same conundrum, but yesterday I just decided to put in $400 monthly. I'm still a student and can barely afford that much right now, but I'm hoping to be able to put much more in once my pay cycle for the summer catches up to me :)

By that, I mean that I'm going to auto-deposit $400 a month and budget for that, and any extra that I have after food and rent I will put in manually.

[TheAnonOne]

I've been struggling with the same conundrum, but yesterday I just decided to put in $400 monthly. I'm still a student and can barely afford that much right now, but I'm hoping to be able to put much more in once my pay cycle for the summer catches up to me :)

By that, I mean that I'm going to auto-deposit $400 a month and budget for that, and any extra that I have after food and rent I will put in manually.

Why not just put in everything manually if your going to do it anyway? Why does the 400 have to be automated?

[GGNoob]

I've been struggling with the same conundrum, but yesterday I just decided to put in $400 monthly. I'm still a student and can barely afford that much right now, but I'm hoping to be able to put much more in once my pay cycle for the summer catches up to me :)

By that, I mean that I'm going to auto-deposit $400 a month and budget for that, and any extra that I have after food and rent I will put in manually.

Why not just put in everything manually if your going to do it anyway? Why does the 400 have to be automated?

Assuming his account is less than $10k, he needs at least $100 a month auto-deposit to avoid a $3 per month fee. Personally, if $400 was cutting it close, I'd just do that $100 and deposit the rest manually. However, with auto-deposit set up, it's fun to look at Betterment's graphs to see your estimated growth down the road.

[Nannooskeeska]

I've been struggling with the same conundrum, but yesterday I just decided to put in $400 monthly. I'm still a student and can barely afford that much right now, but I'm hoping to be able to put much more in once my pay cycle for the summer catches up to me :)

By that, I mean that I'm going to auto-deposit $400 a month and budget for that, and any extra that I have after food and rent I will put in manually.

Why not just put in everything manually if your going to do it anyway? Why does the 400 have to be automated?

Assuming his account is less than $10k, he needs at least $100 a month auto-deposit to avoid a $3 per month fee. Personally, if $400 was cutting it close, I'd just do that $100 and deposit the rest manually. However, with auto-deposit set up, it's fun to look at Betterment's graphs to see your estimated growth down the road.

I think I like your idea better! It gives me a lot more breathing room if anything comes up. Thanks!

I can't wait until I graduate college and get my first full-time job so I can save at a higher rate and grow my mustache to epic proportions :)

[mthrasher16]

I agree with what Slowdown said. Just deposit the money as soon as you can. You are already getting plenty of dollar cost averaging by depositing money weekly. Plus, these daily fluctuations right now won't matter much in the long run.

Since you are depositing $500 a week, I know this must be going into a taxable account. I just wanted to check and make sure...are you maxing all of your tax advantaged accounts first (IRAs, 401k, 457, HSA, etc.)?

Thanks for the reply!  My only tax-savings account is a RothIRA, but yes, that gets maxed out.  I'm actually using it mostly as my 'buy a house fund,' since, for that purpose, funds can be used without penalty.  It's mostly a highly-aggressive tech/bio-tech portfolio based on Nate Pile's investments.  Maybe I'll hit a jackpot....

[mthrasher16]

Since you are depositing $500 a week, I know this must be going into a taxable account. I just wanted to check and make sure...are you maxing all of your tax advantaged accounts first (IRAs, 401k, 457, HSA, etc.)?

+1, make sure you do this first.  If you can afford to deposit $500 a week, you probably have a relatively high tax rate.

Pretty low bracket at 15%....I think that's second or third from the bottom.  I got lucky though with a gf who inherited her house.  <3!