The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: strider3700 on January 29, 2013, 11:10:17 PM
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I opened my first trading account back at the beginning of the year as the loses due to cash at crap interest rates and GIC's was starting to add up to the point that it hurt to think about.
I'm not interested in picking stocks so I went with some of the advice here and in the half dozen other places I read online and went with ETF's. My goal was diverse as possible, 60% index(20% cdn, 20% us, 20% world) 30% bonds (10% cdn gov, 10% corp) and then for the remaining 10% my "gambling" 5% agriculture etf and 5% cdn banks. Everything is in my TFSA so taxes on any of it aren't a concern.
The place I signed up for is through my bank and offered commission free trades on a list of ETF's. so to get the above spread it took 8 ETF's. If I didn't stick to the list it was $30/trade and that really really hurts when you're starting with only $3,000.
Anyway because it costs nothing for me to buy, I'm wondering how often you guys would add to the investments? I normally put $200/week into cash savings. I'd prefer to change that up to $150 to investments and $50 to cash for the foreseeable future. Would you go in every week and spent the $150 or would you build it up and do it monthly? I'm thinking weekly does the best for averaging even if it is a bit of a pain. It's trivial to setup the automatic deposit to the investing account but I don't think I can set it up to do averaging on the purchases easily. I'm also thinking I don't want it to automatically do that anyway. I'll do the rebalancing thank you.
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I do it monthly. But my monthly contribution is about $3000-4000, so brokerage is about half of one percent. If I was saving in $200 chunks and paying brokerage, I'd let it build up a bit to reduce the brokerage in percentage terms. But if brokerage is free, why not go for it!
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I add monthly as well. Again, since trading is free you might as well buy weekly. Good luck.
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Biweekly for me. Every paycheck. Tomorrow is a buying day :)
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Monthly, commission-free ETFs.
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Roth IRA: yearly
401(k): biweekly (don't have a choice there)
Taxable index funds: semi-monthly
The last one is auto-invested. If I was doing it manually, I would probably do it monthly, just because whatever gain I think I'm getting by doing it twice a month wouldn't be worth the effort of manually having to do it twice as often.
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I add to my investments whenever I have extra cash sitting in my checking account. That would make it an almost weekly event.
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Biweekly for me. Every paycheck. Tomorrow is a buying day :)
Same here.
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I do monthly also, I like to do an end of the month round-up of where I am (w/ spending, savings, etc.) and so that also seems like the most convenient time to buy.
I'm curious as to whether or not weekly is really that much different to monthly for averaging. Over the past few years, I've definitely started to notice some cyclic seasonal patterns in the market (i.e., things seem to feel "optimistic" in January, there's a lot of up and down in the summer, etc.), but I feel like buying monthly will mean you hit all of these pretty evenly and thus average out in the end. I guess unless it really works out better I think I would find a weekly investment session to be not worth the effort (unless it is just on auto-invest and you don't have to do anything, in which case, go for it).
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We are maxing out our 401k's and Roth IRA's via paycheck deductions and a monthly transfer to Vanguard. At the end of each month, I check mint.com for our net income (how much extra cash is left over after spending) and I send that amount on its way to our Vangaurd taxable account.
TL;DR: Monthly.
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found one issue with weekly investments
I get a piece of paper from the company confirming each purchase.... So today 7 pieces of paper showed up for the initial purchase. In a few days another bunch should show up from last fridays purchase and that will repeat weekly for the next few years.
Hopefully I can find somewhere to specify the email confirmation I got at time the order was filled is fine unless I need these things for legal purposes...
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I get paid once a month, so... monthly. Whatever asset is lagging.
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I was thinking in the better periodicity for my investing, and did a small excel to back up my numbers, it might be useful for someone else.
So, I get $2500 savings every month for investment purposes, initially they go to a savings account that gives me 4%, or 5% if I don't withdraw any cash. Doing a trade, due to this penalty and some forex fees costs me $50, or $35 if the trade is $10000 or more. I'm assuming a generous 9.6% return of invested assets.
If I do monthly investments the savings penalty, forex charges and trade fees work out to cancel any compounded interest, and after one year of investing I have a $6 loss, but after two years it gets better and I get a $1460 profit.
Bimonthly investments are a $270 profit for the first year, $2027 for the second.
Quarterly investments are a $378 profit for the first year, $2248 for the second.
After four years, the stash difference between the best and the worst of my options is 1%, so choosing the right investment period adds a yearly 0.25% to my stash, I'd say that's significant enough to spend 30 minutes playing with a spreadsheet.
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where are you that you can get 4% or 5% on cash as well as reasonably expect a 9.6% return? Also you fees are worse then mine having done zero trades that cost me anything. They start at $30/trade (up to 1000 shares) and get cheaper the more I do.
Messing around with my spreadsheets I found that by far the most important thing for me was to go with free etf trades. even investing every 6 months would cost me just under 5% at my current investment rate.