Author Topic: How "often" should I buy a mutual fund.  (Read 1175 times)

SaucyAussie

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How "often" should I buy a mutual fund.
« on: April 30, 2019, 08:31:58 AM »
So I have caught up on my tax deferred accounts and have opened a Vanguard account to get started on a taxable investment account.  I have set up a bi-weekly direct deposit which I believe will land in a money market fund, and in turn be used to purchase a mutual fund.  A possible use of this account will be to pay off my mortgage in a lump sum in around 6 years.

My question is - is there any strategy to timing the purchase of the mutual funds?  For instance, should I do it every 3 months, or should I do it as often as possible, or does it really make no difference?

I guess my concern is, when it comes to sell the fund, will having a ton of different purchase dates complicate matters?

Enigma

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Re: How "often" should I buy a mutual fund.
« Reply #1 on: April 30, 2019, 08:42:35 AM »
I am not sure it makes a difference.  I have had brokerage accounts and they have lumped everything into a condensed 1099 then listed all my trades separately.  More things appear to be goign on in the background with Loss harvesting and HIFO accounting.

When I set up my direct deposits, I auto-invest the income directly into the mutual funds of my choice.  I do not tend to land it into the money market fund.  The Admiral shares are 3k min investment.  I would start with that and every 2 weeks my bi-weekly direct deposit goes right into either the Total Bond / Total Stock -or- a mixture of the 2.

bisimpson

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Re: How "often" should I buy a mutual fund.
« Reply #2 on: April 30, 2019, 08:49:21 AM »
I often think about the same thing. I'm curious about what others do.

I buy into my index funds according to my asset allocation as soon as I get it. The saying "time in the market, not timing the market" sticks in the back of my mind.

mies

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Re: How "often" should I buy a mutual fund.
« Reply #3 on: April 30, 2019, 09:10:01 AM »
I just buy every 2 weeks in my taxable account on the same day my 401(k) contributions are made. It takes the anxiety out of whether Iím overpaying for too many shares.

doingfine

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Re: How "often" should I buy a mutual fund.
« Reply #4 on: April 30, 2019, 09:12:25 AM »
I would just change your automatic deposits to be direct purchases of a mutual fund rather than stopping in your money market fund first. Then forget about it. The more automated and hands-off, the better.

Lucky Penny Acres

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Re: How "often" should I buy a mutual fund.
« Reply #5 on: April 30, 2019, 09:20:40 AM »
In terms of complications from too many purchase dates in your taxable account, you have to figure out how you are tracking your cost basis for tax purposes.

The default cost basis option for mutual funds is usually average cost per share - this means that no matter how many different purchase dates and prices you have, you would use the overall average for cost basis purposes for tracking your gains whenever you sell shares. The mutual fund firm should keep track of that average price number for you so it is fairly simple and easy. Adding more frequent purchase dates has no impact on this approach.

If you want to track specific tax lots separately to minimize taxes, that will require more effort on your part. The mutual fund should still keep track of all of it, but when you go to sell and then prepare your taxes that year, you will need to select which tax lots were sold. This is slightly more complicated and requires you to pay more attention. Adding more frequent purchase dates makes record keeping and tracking a little more complicated for this approach.

There should be a cost basis selection on your provider's website. Note that if you select average cost for a sale of a portion of your shares of a mutual fund, you normally cannot elect a different cost basis method for that mutual fund while you still own it.

SaucyAussie

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Re: How "often" should I buy a mutual fund.
« Reply #6 on: April 30, 2019, 10:01:49 AM »
In terms of complications from too many purchase dates in your taxable account, you have to figure out how you are tracking your cost basis for tax purposes.

The default cost basis option for mutual funds is usually average cost per share - this means that no matter how many different purchase dates and prices you have, you would use the overall average for cost basis purposes for tracking your gains whenever you sell shares. The mutual fund firm should keep track of that average price number for you so it is fairly simple and easy. Adding more frequent purchase dates has no impact on this approach.

If you want to track specific tax lots separately to minimize taxes, that will require more effort on your part. The mutual fund should still keep track of all of it, but when you go to sell and then prepare your taxes that year, you will need to select which tax lots were sold. This is slightly more complicated and requires you to pay more attention. Adding more frequent purchase dates makes record keeping and tracking a little more complicated for this approach.

There should be a cost basis selection on your provider's website. Note that if you select average cost for a sale of a portion of your shares of a mutual fund, you normally cannot elect a different cost basis method for that mutual fund while you still own it.

Great info, thanks!  Now what about tracking what is a short term gain and what is long term?  I assume provider does that also?  So when I sell shares I would get some kind of statement that identifies s/t vs l/t?

John Galt incarnate!

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Re: How "often" should I buy a mutual fund.
« Reply #7 on: April 30, 2019, 04:28:33 PM »
I often think about the same thing. I'm curious about what others do.

I buy into my index funds according to my asset allocation as soon as I get it. The saying "time in the market, not timing the market" sticks in the back of my mind.


We are in accordance.


My fixed income portfolio (my "safe money") generates enough income to  pay for all my  recurring liabilities and more $ than I need for day-to-day living expenses so I add this extra $  in ~ the same amount to my equity position every month (FSKAX).

Occasionally   I acquire  a lump sum  that I immediately invest in FSKAX.

I  know neither the  days  the stock market will plunge deeply nor the days  it will have exceptional gains.

I do know that total return can be reduced very significantly by not being invested in the stock  market on the days of its  exceptional gains so I subscribe to the time-in-the-market investing approach.

I never try to time the stock market.

JTColton

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Re: How "often" should I buy a mutual fund.
« Reply #8 on: May 01, 2019, 06:33:47 AM »
You can only put it in the settlement fund if you don't have any funds that you've invested in. Once you invest money in a mutual fund you will be able to automatically invest in that fund every week or every month whatever you like.

I drop some in every paycheck, plus whatever is left over after expenses.

Lucky Penny Acres

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Re: How "often" should I buy a mutual fund.
« Reply #9 on: May 01, 2019, 01:42:46 PM »

Great info, thanks!  Now what about tracking what is a short term gain and what is long term?  I assume provider does that also?  So when I sell shares I would get some kind of statement that identifies s/t vs l/t?

Yes, the provider will track short term and long term for you and report it to you. You should get a Form 1099 at the end of the year that shows the relevant short and long term numbers to plug into your tax return.

Some tax programs (such as TurboTax) allow you to automatically upload Form 1099s from the large providers (such as Vanguard, Fidelity, etc.) into TurboTax so you don't even have to transcribe the numbers from a paper or PDF Form and risk a typo.