Author Topic: Let's time the market together shall we...  (Read 10042 times)

HeadedWest2029

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Let's time the market together shall we...
« on: January 04, 2016, 07:30:40 AM »
Plan all along was to max out my IRA contribution today with 100% international to bring my asset allocation back into order.  Looks like we're set for a huge down day with the Chinese exchanges halted after a 7% drop.  Do I take this gift that was given to me, or do people think we're due for some more drops this week and I should wait to see how this plays out

protostache

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Re: Let's time the market together shall we...
« Reply #1 on: January 04, 2016, 07:44:41 AM »
Overnight was pretty rough internationally. I would take it as a gift and go in today.

I was planning on starting to rolling my IRA into my 401(k) today, which involves liquidating my holdings. I'm going to wait a few hours before putting orders in, just to see how bad things really get. Logically I know it really doesn't matter, but that's going to be >$60k out of the market at once and it'd be nice to not be in transit during a bounce.

dandarc

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Re: Let's time the market together shall we...
« Reply #2 on: January 04, 2016, 07:46:42 AM »
Hope it stays down through Thursday for me!

GoldenStache

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Re: Let's time the market together shall we...
« Reply #3 on: January 04, 2016, 08:09:14 AM »
I would not touch China with your money, let alone mine.  The house of cards is starting to wobble.

HeadedWest2029

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Re: Let's time the market together shall we...
« Reply #4 on: January 04, 2016, 08:12:20 AM »
I guess I should specify, when I say international I'm talking VXUS, not China specifically

Davids

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Re: Let's time the market together shall we...
« Reply #5 on: January 04, 2016, 08:20:53 AM »
Hell yeah of your can max your 2016 Roth already then do it today. I am usually a $2200 per month for first 5 months to max mine and wife but may go all in today or go more than $2200 today.

Retire-Canada

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Re: Let's time the market together shall we...
« Reply #6 on: January 04, 2016, 08:57:56 AM »
Do I take this gift that was given to me, or do people think we're due for some more drops this week and I should wait to see how this plays out

I would take it if that's what your AA and investment plan are telling you to do. How in the world can anyone know what will happen later this week????????????????


HeadedWest2029

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Re: Let's time the market together shall we...
« Reply #7 on: January 04, 2016, 09:04:25 AM »
Obviously no one knows...just for fun.  Mustachians are the type to front load their IRA contributions so I was curious what others were planning on doing with this fun little volatility today. The fact that they had to halt trading in China makes me wonder if there is still some selling to be unleashed when trading resumes overseas.  FYI, I did just max out contributions on international just a bit ago.  May do some more purchases later this week too.

Travis

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Re: Let's time the market together shall we...
« Reply #8 on: January 04, 2016, 09:59:49 AM »
What's the logic behind front-loading your IRA?

dandarc

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Re: Let's time the market together shall we...
« Reply #9 on: January 04, 2016, 10:01:09 AM »
What's the logic behind front-loading your IRA?
You'll have more money in tax-advantaged accounts down the road.

Philociraptor

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Re: Let's time the market together shall we...
« Reply #10 on: January 04, 2016, 10:05:18 AM »
What's the logic behind front-loading your IRA?

See here.

shotgunwilly

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Re: Let's time the market together shall we...
« Reply #11 on: January 04, 2016, 10:08:01 AM »
What's the logic behind front-loading your IRA?
You'll have more money in tax-advantaged accounts down the road.

Not necessarily.

dandarc

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Re: Let's time the market together shall we...
« Reply #12 on: January 04, 2016, 10:17:24 AM »
What's the logic behind front-loading your IRA?
You'll have more money in tax-advantaged accounts down the road.

Not necessarily.
Just stating a technicality?  Yes, it is possible that you wind up with less than you would by waiting to invest.  However, if you wait to invest, it is more likely that you wind up with less in that IRA than you would by just investing the full amount each January 1st.  The longer your time-frame for contributions, the more likely it is that front-loading will beat waiting.

Debts_of_Despair

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Re: Let's time the market together shall we...
« Reply #13 on: January 04, 2016, 10:18:05 AM »
Put in some big transactions on Jan 1 that I'm still waiting for to clear.  Looks like I will get some deals.

Debts_of_Despair

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Re: Let's time the market together shall we...
« Reply #14 on: January 04, 2016, 10:19:42 AM »
What's the logic behind front-loading your IRA?

If you are betting on the markets going up in the long term, it is better to get in sooner than later.

http://www.businessinsider.com/lump-sum-vs-dollar-cost-averaging-2014-12
« Last Edit: January 04, 2016, 10:22:16 AM by Debts_of_Despair »

JZinCO

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Re: Let's time the market together shall we...
« Reply #15 on: January 04, 2016, 10:25:22 AM »
Obviously no one knows...just for fun.  Mustachians are the type to front load their IRA contributions so I was curious what others were planning on doing with this fun little volatility today. The fact that they had to halt trading in China makes me wonder if there is still some selling to be unleashed when trading resumes overseas.  FYI, I did just max out contributions on international just a bit ago.  May do some more purchases later this week too.
For what it's worth I put in half of my IRA annual contributions for 2016 today. Not all in emerging markets of course. The rest will go in later this week.
I just figured, why put it off when I can get it done today. I can't know when the optimal time to put in the contributions are but, might as well put them in on a down day. A touch more of 'time in the market' than timing the market.

For me a bigger value is I can cross that off the list of 2016 to-dos and don't have to worry about a monthly budget item.

zephyr911

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Re: Let's time the market together shall we...
« Reply #16 on: January 04, 2016, 10:27:38 AM »
I don't do timing, but I can tell you a stock that's ridiculously undervalued right now.

GLBL. If I had more free cash I'd grab a shitload. As is, five figures.

Jack

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Re: Let's time the market together shall we...
« Reply #17 on: January 04, 2016, 10:37:45 AM »
So I'd been planning to change my asset allocation to include international and buy into VTIAX (Admiral shares version of VXUS), and this morning finally got around to it. I idly wondered if today was a good day for the lump sum $10000 VTSAX->VTIAX exchange, but didn't bother to check. This thread makes me happy.

(I probably should have just switched to ETFs long ago instead of waiting until I had $20K in a single account, but whatever.)

dandarc

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Re: Let's time the market together shall we...
« Reply #18 on: January 04, 2016, 10:38:30 AM »
I don't do timing, but I can tell you a stock that's ridiculously undervalued right now.

GLBL. If I had more free cash I'd grab a shitload. As is, five figures.
Why?

CheapskateWife

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Re: Let's time the market together shall we...
« Reply #19 on: January 04, 2016, 10:42:13 AM »
I don't do timing, but I can tell you a stock that's ridiculously undervalued right now.

GLBL. If I had more free cash I'd grab a shitload. As is, five figures.
Why?

Numerous law suits and an SEC filing alleging fraud...ouchie.  So how do you know they will recover?

zz_marcello

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Re: Let's time the market together shall we...
« Reply #20 on: January 04, 2016, 10:44:07 AM »
I don't do timing, but I can tell you a stock that's ridiculously undervalued right now.

GLBL. If I had more free cash I'd grab a shitload. As is, five figures.

I had a look; the technical trend is down and they seem to have negative earnings currently and they are getting more negative.
The dividend means nothing if it is not backed up by positive cash flow; or?
Have a nice day!

FerrumB5

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Re: Let's time the market together shall we...
« Reply #21 on: January 04, 2016, 10:59:42 AM »
So I'd been planning to change my asset allocation to include international and buy into VTIAX (Admiral shares version of VXUS), and this morning finally got around to it. I idly wondered if today was a good day for the lump sum $10000 VTSAX->VTIAX exchange, but didn't bother to check. This thread makes me happy.

(I probably should have just switched to ETFs long ago instead of waiting until I had $20K in a single account, but whatever.)

VTIAX growth is so much lower in the past 5+ years than VTSAX or similar. Just wondering if this 10k is a small or substantial fraction of your full portfolio

JJsfr

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Re: Let's time the market together shall we...
« Reply #22 on: January 04, 2016, 12:15:41 PM »
I was planning on liquidating a bunch (~12k) of cap gains in a mutual fund today as we finally were able to lower taxable income to stay in 15% bracket with that amount of cap gains. It's all going back into the market tomorrow, but with mutual funds who knows what tomorrow brings.

Of course, now I'm wondering if I should wait for a more stable day. Anybody have resources on the information needed to make a smart decision? Or is this the quintessential "wait and see and deliberate" thing?

frugledoc

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Re: Let's time the market together shall we...
« Reply #23 on: January 04, 2016, 12:42:03 PM »
I don't do timing, but I can tell you a stock that's ridiculously undervalued right now.

GLBL. If I had more free cash I'd grab a shitload. As is, five figures.

Hopefully no newbies stumble across this thread and follow this random stock pick.

Travis

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Re: Let's time the market together shall we...
« Reply #24 on: January 04, 2016, 01:01:15 PM »
What's the logic behind front-loading your IRA?
You'll have more money in tax-advantaged accounts down the road.

Not necessarily.
Just stating a technicality?  Yes, it is possible that you wind up with less than you would by waiting to invest.  However, if you wait to invest, it is more likely that you wind up with less in that IRA than you would by just investing the full amount each January 1st.  The longer your time-frame for contributions, the more likely it is that front-loading will beat waiting.

Mine comes out in equal portions each month.  If I put in a lump sum today, would Vanguard automatically adjust or cut me off when it hits the limit later in the year?

dandarc

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Re: Let's time the market together shall we...
« Reply #25 on: January 04, 2016, 01:09:06 PM »
Mine comes out in equal portions each month.  If I put in a lump sum today, would Vanguard automatically adjust or cut me off when it hits the limit later in the year?
Good question for Vanguard.  Or you could just turn off your auto-pay and spend 5 minutes / month to make the deposit manually until you've hit your limit for the year.

Philociraptor

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Re: Let's time the market together shall we...
« Reply #26 on: January 04, 2016, 01:32:41 PM »
Mine comes out in equal portions each month.  If I put in a lump sum today, would Vanguard automatically adjust or cut me off when it hits the limit later in the year?

Vanguard will not allow you to put more than the federal limit into your IRA. If you make a contribution in addition to your automatic contributions they will adjust your automatic contributions to hit the limit (if that's how you have it setup).

Jack

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Re: Let's time the market together shall we...
« Reply #27 on: January 04, 2016, 01:35:01 PM »
So I'd been planning to change my asset allocation to include international and buy into VTIAX (Admiral shares version of VXUS), and this morning finally got around to it. I idly wondered if today was a good day for the lump sum $10000 VTSAX->VTIAX exchange, but didn't bother to check. This thread makes me happy.

(I probably should have just switched to ETFs long ago instead of waiting until I had $20K in a single account, but whatever.)

VTIAX growth is so much lower in the past 5+ years than VTSAX or similar. Just wondering if this 10k is a small or substantial fraction of your full portfolio

It's a little under 20% at the moment (only including retirement accounts... and I haven't made my 2015 IRA contributions yet because I'm refinancing and don't want to make large sudden changes to my checking account, so it'll shortly be closer to 15%).

Anyway, who cares what the short-term trailing returns were? The question is whether the fundamentals of international equities are good, and if they are then a low-cost index of them is a good pick. Besides, if market-timing is your thing, then you should realize that 5 years of under-performance is just another name for "on sale!"

I do plan to add a tilt towards emerging-markets in the future, though (either next time I can afford another $10K buy-in to Admiral shares, or maybe sooner using ETFs in a non-retirement account).

Travis

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Re: Let's time the market together shall we...
« Reply #28 on: January 04, 2016, 01:46:15 PM »
Mine comes out in equal portions each month.  If I put in a lump sum today, would Vanguard automatically adjust or cut me off when it hits the limit later in the year?

Vanguard will not allow you to put more than the federal limit into your IRA. If you make a contribution in addition to your automatic contributions they will adjust your automatic contributions to hit the limit (if that's how you have it setup).

I figured I wouldn't be allowed to go over the limit, I just wasn't sure if Vanguard would recalculate the monthly contribution or keep withdrawing until the limit was reached.

Philociraptor

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Re: Let's time the market together shall we...
« Reply #29 on: January 04, 2016, 01:48:24 PM »

Mine comes out in equal portions each month.  If I put in a lump sum today, would Vanguard automatically adjust or cut me off when it hits the limit later in the year?

Vanguard will not allow you to put more than the federal limit into your IRA. If you make a contribution in addition to your automatic contributions they will adjust your automatic contributions to hit the limit (if that's how you have it setup).

I figured I wouldn't be allowed to go over the limit, I just wasn't sure if Vanguard would recalculate the monthly contribution or keep withdrawing until the limit was reached.

Depends on how you have it setup. If you have a specific $ amount invested at intervals, it will continue to use that amount until you hit your limit. If you have it set to reach the limit based on a certain number of payments, it will reduce those payments to be equal across the remaining payments. I hope that makes sense.

Travis

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Re: Let's time the market together shall we...
« Reply #30 on: January 04, 2016, 01:58:44 PM »

Mine comes out in equal portions each month.  If I put in a lump sum today, would Vanguard automatically adjust or cut me off when it hits the limit later in the year?

Vanguard will not allow you to put more than the federal limit into your IRA. If you make a contribution in addition to your automatic contributions they will adjust your automatic contributions to hit the limit (if that's how you have it setup).

I figured I wouldn't be allowed to go over the limit, I just wasn't sure if Vanguard would recalculate the monthly contribution or keep withdrawing until the limit was reached.

Depends on how you have it setup. If you have a specific $ amount invested at intervals, it will continue to use that amount until you hit your limit. If you have it set to reach the limit based on a certain number of payments, it will reduce those payments to be equal across the remaining payments. I hope that makes sense.

Done. I was able to knock out half of mine today.  Thanks.  We'll see how it plays out in a couple months.

zephyr911

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Re: Let's time the market together shall we...
« Reply #31 on: January 04, 2016, 02:01:19 PM »
Hopefully no newbies stumble across this thread and follow this random stock pick.
Anyone dumb enough to do that deserves to lose money, and I mean that.

I had a look; the technical trend is down and they seem to have negative earnings currently and they are getting more negative.
The dividend means nothing if it is not backed up by positive cash flow; or?
Have a nice day!
Yieldco accounting is a lot like rentals. GAAP earnings can be extremely deceptive, especially during periods of growth.
I typed a bunch of other stuff but realized it was OT and I don't wanna contribute to derailment.
****************************

Back on the intended thrust of this thread, I plan on exactly equal TSP contributions all year. I would consider frontloading but it's such a pain in the ass with our in-house processes that I'd rather get the contributions on track for exactly the max and leave them. When I get enough ahead on the cash flow game (a challenge for years now) I'll probably start frontloading IRAs since the transactional aspect is so much easier than with TSP.

Regardless, all free cash gets invested somewhere - TSP, IRA, real estate, taxable accounts, or something else. Don't leave money on the sidelines except in times of extreme duress or great uncertainty.

FerrumB5

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Re: Let's time the market together shall we...
« Reply #32 on: January 04, 2016, 03:27:08 PM »
So I'd been planning to change my asset allocation to include international and buy into VTIAX (Admiral shares version of VXUS), and this morning finally got around to it. I idly wondered if today was a good day for the lump sum $10000 VTSAX->VTIAX exchange, but didn't bother to check. This thread makes me happy.

(I probably should have just switched to ETFs long ago instead of waiting until I had $20K in a single account, but whatever.)

VTIAX growth is so much lower in the past 5+ years than VTSAX or similar. Just wondering if this 10k is a small or substantial fraction of your full portfolio

It's a little under 20% at the moment (only including retirement accounts... and I haven't made my 2015 IRA contributions yet because I'm refinancing and don't want to make large sudden changes to my checking account, so it'll shortly be closer to 15%).

Anyway, who cares what the short-term trailing returns were? The question is whether the fundamentals of international equities are good, and if they are then a low-cost index of them is a good pick. Besides, if market-timing is your thing, then you should realize that 5 years of under-performance is just another name for "on sale!"

I do plan to add a tilt towards emerging-markets in the future, though (either next time I can afford another $10K buy-in to Admiral shares, or maybe sooner using ETFs in a non-retirement account).

I'm not sure what you mean by short-term trailing results of VTIAX vs VTSAX. The fundamentals of intl equities are good, but will I put money into VTIAX when it shows -7% of stock value over 10 past years? or total 1.5k growth with dividends of 10k in 5 years? Probably not.
You can. I'm not judging just wondering

MustacheAndaHalf

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Re: Let's time the market together shall we...
« Reply #33 on: January 04, 2016, 10:32:36 PM »
I would not touch China with your money, let alone mine.  The house of cards is starting to wobble.
China's losses today dragged US stocks partly with it - it's hard to completely avoid the impact of China's markets.  Vanguard Total International is 17% emerging markets, and China is 29% of emerging markets.  So a broad international index is going to hold 5% stocks from China.  Invest $1000 internationally, and that's $50 in China.


Back closer to topic: What the news shows, everyone knows.  Which goes for both China and market timing: the problem is an expert trader bought/sold within a fraction of a second, while we're discussing what to do hours later.  Market timing happens in milliseconds, not hours.

Jack

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Re: Let's time the market together shall we...
« Reply #34 on: January 05, 2016, 07:55:43 AM »
I'm not sure what you mean by short-term trailing results of VTIAX vs VTSAX. The fundamentals of intl equities are good, but will I put money into VTIAX when it shows -7% of stock value over 10 past years? or total 1.5k growth with dividends of 10k in 5 years? Probably not.

What I mean is that the previous returns of any fund I don't already own are completely irrelevant; the only thing that matters is what I expect it to do in the future. And by "future" I mean 20 - 50 years from now, not 5.* Given that I expect the developing world's economy to eventually catch up to the US's (which implies that theirs would be growing faster), that makes international a better buy.

But the real issue is that even if I didn't think it was going to do better, I'd still buy it because I don't know the future and could benefit from the diversification. (A true, cap-weighted total stock market portfolio is something like 45% international; the 100% VTSAX I had before was an extreme US tilt. Some US tilt is appropriate since I live here and invest dollars, but not that much!) Even if I thought VTSAX would do better in the long term, I don't want to take that much risk of being wrong.

The bottom line is that a 7% drop just before I buy a fund is not even slightly something to be concerned about. It just means I get more shares for less money, and that's a good thing!

In contrast, your strategy -- to buy VTSAX because it's expensive, and avoid buying VTIAX because it's cheap -- is exactly the opposite of what you should do. It's the epitome of "buy high, sell low." (Of course, by "expensive" and "cheap" I'm really talking more about PE ratio and whatnot than current price vs. past price, but I digress...)

(* Even if my FIRE date is sooner -- I'm aiming for 10-15 years from now -- it's not as if I plan to switch to a 100% cash portfolio on that date, so my time horizon is still much longer.)

soccerluvof4

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Re: Let's time the market together shall we...
« Reply #35 on: January 05, 2016, 04:37:05 PM »
I bought the dip.... I know alot of people dont believe in DCA and I am fine with that BUT i have more cash than usual and feel the market is high and is in need of a major correction. Maybe I am right, maybe i am wrong but since i have enough invested I will sit on my cash and buy the dips.

Retire-Canada

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Re: Let's time the market together shall we...
« Reply #36 on: January 05, 2016, 05:10:19 PM »
What I mean is that the previous returns of any fund I don't already own are completely irrelevant; the only thing that matters is what I expect it to do in the future. And by "future" I mean 20 - 50 years from now, not 5.* Given that I expect the developing world's economy to eventually catch up to the US's (which implies that theirs would be growing faster), that makes international a better buy.

But the real issue is that even if I didn't think it was going to do better, I'd still buy it because I don't know the future and could benefit from the diversification. (A true, cap-weighted total stock market portfolio is something like 45% international; the 100% VTSAX I had before was an extreme US tilt. Some US tilt is appropriate since I live here and invest dollars, but not that much!) Even if I thought VTSAX would do better in the long term, I don't want to take that much risk of being wrong.


+1 - on the power of diversification :)



WR rates for ^^^ US only equities.

http://portfoliocharts.com/portfolio/withdrawal-rates/



WR rates ^^^ for US + Int'l equities.

TheOldestYoungMan

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Re: Let's time the market together shall we...
« Reply #37 on: January 06, 2016, 09:42:02 AM »
With respect to the dollar cost averaging vs. lump sum investing, someone somewhere did a study where it shows historically greater returns if you just dump everything in as soon as you can.

But the difference wasn't enough to compel me to really change what I do.  All last year I took MMM's advice to just put everything into the market as soon as I earned it, and that worked out well for me.  It was a little experiment I did, and there was a huge savings benefit to just not ever having money on hand.  It really forced me to solve problems with effort instead of cash.

Also, unless it's a bonus or an inheritance, your lump sum today would have been better as a DCA contribution yesterday.  I don't frontload my IRA because to do that would mean waiting to invest, holding cash, and I don't hold cash because I don't try to time the market.

Now if I was working somewhere where I got a big holiday bonus or whatever I could see just dumping it into the IRA in the first week.

HeadedWest2029

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Re: Let's time the market together shall we...
« Reply #38 on: January 06, 2016, 09:57:26 AM »
In addition to the Bogheads link above, I've come around to lump sum front-loading vs DCA after reading research done by Vanguard.  Also, Mad Fientist posts a lot about it (see: http://www.madfientist.com/front-loading/).  As does Jim Collins http://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/

dandarc

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Re: Let's time the market together shall we...
« Reply #39 on: January 06, 2016, 10:13:06 AM »
With respect to the dollar cost averaging vs. lump sum investing, someone somewhere did a study where it shows historically greater returns if you just dump everything in as soon as you can.

But the difference wasn't enough to compel me to really change what I do.  All last year I took MMM's advice to just put everything into the market as soon as I earned it, and that worked out well for me.  It was a little experiment I did, and there was a huge savings benefit to just not ever having money on hand.  It really forced me to solve problems with effort instead of cash.

Also, unless it's a bonus or an inheritance, your lump sum today would have been better as a DCA contribution yesterday.  I don't frontload my IRA because to do that would mean waiting to invest, holding cash, and I don't hold cash because I don't try to time the market.

Now if I was working somewhere where I got a big holiday bonus or whatever I could see just dumping it into the IRA in the first week.
You were lump sum investing all along. 

If you don't have the money on hand, there is no DCA / Lump sum choice to make.  Every time you got paid last year, you made the choice to lump-sum the available money immediately, rather than wait to invest.

JZinCO

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Re: Let's time the market together shall we...
« Reply #40 on: January 06, 2016, 11:52:20 AM »
With respect to the dollar cost averaging vs. lump sum investing, someone somewhere did a study where it shows historically greater returns if you just dump everything in as soon as you can.

But the difference wasn't enough to compel me to really change what I do.  All last year I took MMM's advice to just put everything into the market as soon as I earned it, and that worked out well for me.  It was a little experiment I did, and there was a huge savings benefit to just not ever having money on hand.  It really forced me to solve problems with effort instead of cash.

Also, unless it's a bonus or an inheritance, your lump sum today would have been better as a DCA contribution yesterday.  I don't frontload my IRA because to do that would mean waiting to invest, holding cash, and I don't hold cash because I don't try to time the market.

Now if I was working somewhere where I got a big holiday bonus or whatever I could see just dumping it into the IRA in the first week.
You were lump sum investing all along. 

If you don't have the money on hand, there is no DCA / Lump sum choice to make.  Every time you got paid last year, you made the choice to lump-sum the available money immediately, rather than wait to invest.
Yes, this is a correct. Most folks have two optimal options. Lump sum $5500 on the front end (this assumes you have excess cash accruing in the prior year), lump sum smaller amounts throughout the year according to cash flow (italicized discussion). The two suboptimal options are lump sum $5500 on the back end and DCA throughout the year (bolded discussion).