Author Topic: Does frequency of contributions matter?  (Read 700 times)

BayAreaFrugal

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Does frequency of contributions matter?
« on: March 10, 2020, 03:26:26 PM »
I make regular monthly contributions to my investment accounts. In light of recent volatility, where the market is making massive swings nearly every day, I'm wondering if more frequent contributions could increase my returns? With a ~7% drop yesterday followed by a 5% increase today, it seems like smaller, more frequent contributions avoid the risk of less frequent, bigger contributions happening to fall on a big upswing day. Or am I overthinking it and the difference between weekly vs monthly contributions isn't enough to waste time thinking about?

mjr

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Re: Does frequency of contributions matter?
« Reply #1 on: March 10, 2020, 03:31:38 PM »
You are wayyy over-thinking it. 

JLee

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Re: Does frequency of contributions matter?
« Reply #2 on: March 10, 2020, 03:37:03 PM »
Time in the market statistically beats all else.  The earlier money is in, the better it will do.

Radagast

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Re: Does frequency of contributions matter?
« Reply #3 on: March 10, 2020, 10:51:28 PM »
As JLee says, in an exponentially increasing market time is most important. In things that have similar volatility to the market but no expected gain, for example long term bonds or gold, you might gain a few basis points by making more frequent smaller contributions, but in most cases it would be lost in the noise.

marty998

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Re: Does frequency of contributions matter?
« Reply #4 on: March 11, 2020, 12:20:40 AM »
I make regular monthly contributions to my investment accounts. In light of recent volatility, where the market is making massive swings nearly every day, I'm wondering if more frequent contributions could increase my returns? With a ~7% drop yesterday followed by a 5% increase today, it seems like smaller, more frequent contributions avoid the risk of less frequent, bigger contributions happening to fall on a big upswing day. Or am I overthinking it and the difference between weekly vs monthly contributions isn't enough to waste time thinking about?

Are your brokerage amounts a fixed cost or % value of the trade? If fixed, you don't want to be losing too high a % to entry costs...

terran

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Re: Does frequency of contributions matter?
« Reply #5 on: March 11, 2020, 08:33:42 AM »
I make regular monthly contributions to my investment accounts. In light of recent volatility, where the market is making massive swings nearly every day, I'm wondering if more frequent contributions could increase my returns? With a ~7% drop yesterday followed by a 5% increase today, it seems like smaller, more frequent contributions avoid the risk of less frequent, bigger contributions happening to fall on a big upswing day. Or am I overthinking it and the difference between weekly vs monthly contributions isn't enough to waste time thinking about?

Are your brokerage amounts a fixed cost or % value of the trade? If fixed, you don't want to be losing too high a % to entry costs...

If you're paying your brokerage anything to trade your chosen ETFs or mutual funds then you're doing it wrong (at least in the US) as there are many commission free options at all the major brokerages (Vanguard, Fidelity, Schwab, Etrade, etc).

I agree with the others. Investing as soon as you have the money has been shown to outperform on average. Usually this is examined as single large lump sum investing in contrast to dollar cost averaging, which means putting in smaller amounts over time in the hopes of minimize potential loss. Even though you're asking about putting in smaller amounts, you'd actually be getting the money invested sooner, which should on average result in higher returns, but I think there's a point where it just isn't worth the hassle. I'd just keep doing monthly unless you're investing huge amounts every month. I probably wouldn't increase the frequency to more than monthly unless you'd be investing $5-10k each time even at the increased frequency (meaning if you're currently investing $10-20k/month, maybe start investing every two weeks), but it still probably isn't that big a deal.