Author Topic: Maxing IRA contribution January 1st vs spacing out over 2019/how to invest other  (Read 1184 times)

zoochadookdook

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Hey all. Excited about the new 6k roth limit. I have the money set aside to contribute but was wondering if cost averaging or lump summing it is generally the "better" way to go (obviously no one knows the market). If I lump it=more time/could be buying high. If I average it monthly/less risk/less time. Any insight?

Also have hoarded and stashed cash for a while. Looking to invest in other markets but have no clue what to look at. I make 30-35k a year working >10 hours a week self employed and just graduated college with a MIS degree. Unfortunately most DBA/JR DBA jobs I'm looking at want 3 years experience.

Current finances
Current finances:
26 yr/old
63800 in cash/banks (just generic accounts no high yield)-wouldn't be opposed to swapping that over and nailing some bonus account $$
$700 in bitcoin ow
$700 random stocks
115k opened on mortgage (home estimated 180k)
$21k in Roth IRA (all vanguards 2060 target date fund)

loans: 13,500 at 3.8% apr starting July 2018.

any insight is welcome. Thanks
« Last Edit: January 02, 2019, 11:13:22 AM by zoochadookdook »

Rob_bob

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If you lump sum then the market will go down and you will have wished you had DCA in.

If you DCA then the market will start to go up and you will have wished.....well you know.

Historically the market goes up longer than it goes down.

As for myself I will be lump summing.

zoochadookdook

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If you lump sum then the market will go down and you will have wished you had DCA in.

If you DCA then the market will start to go up and you will have wished.....well you know.

Historically the market goes up longer than it goes down.

As for myself I will be lump summing.

There has to be some kind of credible report or study to review. Who knows though.

RWD

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https://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/

I will be lump summing as soon as I get the bonus in my Ally savings account (January 15th).

Arbitrage

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Has the long-term direction of the markets been up or down?  If up, then lump sum will win on average.  If down, then DCA will win on average.

Some people will DCA as a way to better deal emotionally with the turmoil of the markets.  I think that you should just have a proper asset allocation to handle that. 

Your bigger issue is your apparent unwillingness to invest.

64k in cash, and 700 in the market? 

Your current liquid asset allocation (ignoring debt ) is 98% cash, 1% stocks, 1% bitcoin.  Not a proper asset allocation for someone who wants long term growth, or really just about anyone in any situation.  If you lump sum invested $6k into a stock mutual fund, you'd be at 10% stocks, 1% bitcoin, and 89% cash, which is still way too conservative.  DCA should be out of the question, IMO, and you should really be looking into putting your other capital to work.

If you're not very comfortable investing, I'd suggest something like a balanced 60/40 fund like VBIAX or VSMGX at Vanguard, keeping only as much cash as you need. 

Finally, it makes little sense to be earning 1-2% on 64k in cash, less after taxes, while paying 3.8% on $13,500. 

JenniferW

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I feel the market might continue going down a bit, so I am going to DCA this year.  Of course no one knows, but either way the money will be invested.

Joel

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I donít contribute until the year is over as Iím near the contribution limit. I may have to do a backdoor Roth IRA instead of the normal Roth IRA, and I wait until the last couple months of the year to confirm eligibility before contributing anything.

zoochadookdook

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Has the long-term direction of the markets been up or down?  If up, then lump sum will win on average.  If down, then DCA will win on average.

Some people will DCA as a way to better deal emotionally with the turmoil of the markets.  I think that you should just have a proper asset allocation to handle that. 

Your bigger issue is your apparent unwillingness to invest.

64k in cash, and 700 in the market? 

Your current liquid asset allocation (ignoring debt ) is 98% cash, 1% stocks, 1% bitcoin.  Not a proper asset allocation for someone who wants long term growth, or really just about anyone in any situation.  If you lump sum invested $6k into a stock mutual fund, you'd be at 10% stocks, 1% bitcoin, and 89% cash, which is still way too conservative.  DCA should be out of the question, IMO, and you should really be looking into putting your other capital to work.

If you're not very comfortable investing, I'd suggest something like a balanced 60/40 fund like VBIAX or VSMGX at Vanguard, keeping only as much cash as you need. 

Finally, it makes little sense to be earning 1-2% on 64k in cash, less after taxes, while paying 3.8% on $13,500.

my current Roth IRA has $21k in it-sorry omitted that. Last year around may I had started researching and discovered the Edward jones way was all kinds of stupid and transferred it all. Currently all ira is in a vanguard 2060 target date fund which I believe is 90 stocks/10 bonds

starguru

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If you invest in a company 401k with a match make sure you don’t lose the match if you lump sum.  A lot of company matches function such that you need to spread the contributions out over all your paychecks.


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Nothlit

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If you lump sum then the market will go down and you will have wished you had DCA in.

If you DCA then the market will start to go up and you will have wished.....well you know.

Historically the market goes up longer than it goes down.

As for myself I will be lump summing.

There has to be some kind of credible report or study to review. Who knows though.

Vanguard wrote a whitepaper: https://personal.vanguard.com/pdf/s315.pdf

terran

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If you lump sum then the market will go down and you will have wished you had DCA in.

If you DCA then the market will start to go up and you will have wished.....well you know.

Historically the market goes up longer than it goes down.

As for myself I will be lump summing.

There has to be some kind of credible report or study to review. Who knows though.

Vanguard wrote a whitepaper: https://personal.vanguard.com/pdf/s315.pdf

Here's a more recent one: https://personal.vanguard.com/pdf/ISGDCA.pdf

zoochadookdook

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If you invest in a company 401k with a match make sure you donít lose the match if you lump sum.  A lot of company matches function such that you need to spread the contributions out over all your paychecks.


Sent from my iPhone using Tapatalk

I actually just graduated this past month. Have been self employed so I can match my own 401k to a limit but haven't really been.

MTBmustachian

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Quote
Excited about the new 6k roth limit.

Nice, this is the first I've heard of this. Thanks!

(Confirmed here: https://www.rothira.com/roth-ira-limits-2019 )