The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: VaCPA on April 26, 2016, 05:03:59 AM
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Ok I'm not really trying to time the market. But I do need to make my 5k Roth contribution(backdoor) at some point in the next year. How do you guys handle it? Make the contribution at the same time each year, or try to pick the optimal time(dip) during the year to stick it in.
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I just throw funds in my investments whenever they come available.
Obviously I'm happy if that happens after a few days in the red, but in the grand scheme of things it will not matter that much so who cares :)
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I put in $11k the first week of January. Non-deductible IRA of $5500 for me and $5500 for the spouse. Convert to Roth the next day.
You never know how it's going to work out. This year, it would have been better to wait until the 3rd or 4th week of January, but how was anyone to know?
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Not to be a jerk but "I'm not trying to time the market but how should I time the market?" is a bit silly.
That being said just invest it. You're not investing for a short term so the "optimal" time is a fools task. You're investing in the long term so what you're looking for is long term appreciation where your exact time of initial investment doesn't matter all that much.
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Not to be a jerk but "I'm not trying to time the market but how should I time the market?" is a bit silly.
That being said just invest it. You're not investing for a short term so the "optimal" time is a fools task. You're investing in the long term so what you're looking for is long term appreciation where your exact time of initial investment doesn't matter all that much.
Yeah I figured someone had to nitpick. My point was just I'm not trying to time the market with my portfolio(buying/selling/moving money around). I always set it & forget it but since I have to put $5k into my Roth at some point this year I've just been thinking about when to do it. I know in the long term it doesn't make a huge difference but people here obsess over the smallest of savings so I'm surprised the consensus is who cares
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Not to be a jerk but "I'm not trying to time the market but how should I time the market?" is a bit silly.
That being said just invest it. You're not investing for a short term so the "optimal" time is a fools task. You're investing in the long term so what you're looking for is long term appreciation where your exact time of initial investment doesn't matter all that much.
Yeah I figured someone had to nitpick. My point was just I'm not trying to time the market with my portfolio(buying/selling/moving money around). I always set it & forget it but since I have to put $5k into my Roth at some point this year I've just been thinking about when to do it. I know in the long term it doesn't make a huge difference but people here obsess over the smallest of savings so I'm surprised the consensus is who cares
It's not "who cares", it's your crystal ball is as good as anyone's. It is too much of an unknown; given that massive amount of uncertainty the short term volatility is in the category of things you can't do anything about and not worth your time to worry about. Move on to things within your sphere of control.
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Not to be a jerk but "I'm not trying to time the market but how should I time the market?" is a bit silly.
That being said just invest it. You're not investing for a short term so the "optimal" time is a fools task. You're investing in the long term so what you're looking for is long term appreciation where your exact time of initial investment doesn't matter all that much.
Yeah I figured someone had to nitpick. My point was just I'm not trying to time the market with my portfolio(buying/selling/moving money around). I always set it & forget it but since I have to put $5k into my Roth at some point this year I've just been thinking about when to do it. I know in the long term it doesn't make a huge difference but people here obsess over the smallest of savings so I'm surprised the consensus is who cares
It's not "who cares", it's your crystal ball is as good as anyone's. It is too much of an unknown; given that massive amount of uncertainty the short term volatility is in the category of things you can't do anything about and not worth your time to worry about. Move on to things within your sphere of control.
No I get it, that it's an educated guess at best and nobody knows what's going to happen. Still, it seems prudent to me to at least give it a little thought, since I'm making a lump sum contribution one way or another anyways. If for no other reason than to entertain myself. It's interesting seeing other opinions though.
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I always wait for a dip. Last couple years it's been January. It means you have to have your ass in gear and have the cash waiting in January. Worst case scenario a dip never happens and you invest it on the last day of the tax year and are out nothing. Begin again for the next year.
In the end it's not a make or break thing, so no worries, but I think it's an easy thing to prepare for.
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I'm not sure if this is a question about timing but more of a behavioral question.
The odds say putting a lump sum in sooner than later it the best option since the market (not sure which market but let's say sp500) goes up more often than down.
But catching one of those down days/weeks/months can lead to buyer's remorse which could color one's investing behavior going forward.
Therefore I agree with Burton Malkiel that DCA'ing may be the preferred method (much like Ramsey's debt snowball method, it is not mathematically optimal but may be psychologically).
So rationally we should put it in up front, all at once. Emotionally, we may want to wait for the optimal time to let those dollars enter the market. Perhaps one method is to split up the $5500 into 12 months ($458.33/mo) and set a rule for deviating from equal payments (unequal DCA). It might look like "If the index goes down put in 2x percent more than the change in the index. Make no change if the index goes up."
It might look like this:
Mo0: $458
Mo1 (index goes down 5%): 458*1.1=$504
Mo2 (index goes up 3%): $504
Mo3 (index goes up 2%): 504*1.04=$524
Whatever mind tricks you have to do. In this example scheme, on a short term minded basis, you ratchet up so at least you feel you are buying more shares than the prior month. Does it matter in the long term? nope.
In my case, I don't like tracking my contributions so I like to throw it all in on Jan 1.
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Not to be a jerk but "I'm not trying to time the market but how should I time the market?" is a bit silly.
That being said just invest it. You're not investing for a short term so the "optimal" time is a fools task. You're investing in the long term so what you're looking for is long term appreciation where your exact time of initial investment doesn't matter all that much.
Yeah I figured someone had to nitpick. My point was just I'm not trying to time the market with my portfolio(buying/selling/moving money around). I always set it & forget it but since I have to put $5k into my Roth at some point this year I've just been thinking about when to do it. I know in the long term it doesn't make a huge difference but people here obsess over the smallest of savings so I'm surprised the consensus is who cares
It's not "who cares", it's your crystal ball is as good as anyone's. It is too much of an unknown; given that massive amount of uncertainty the short term volatility is in the category of things you can't do anything about and not worth your time to worry about. Move on to things within your sphere of control.
No I get it, that it's an educated guess at best and nobody knows what's going to happen. Still, it seems prudent to me to at least give it a little thought, since I'm making a lump sum contribution one way or another anyways. If for no other reason than to entertain myself. It's interesting seeing other opinions though.
To put it another way a lump sum contribution waiting for a market drop has no difference between you selling and waiting for a drop. Would you sell in order to wait for a drop?
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I put in $11k the first week of January. Non-deductible IRA of $5500 for me and $5500 for the spouse. Convert to Roth the next day.
You never know how it's going to work out. This year, it would have been better to wait until the 3rd or 4th week of January, but how was anyone to know?
This is what we did as well. Earlier in our path to FIRE when cash flow wasn't quite there to do this, we just divided the yearly amount by 12 and did one a month with no real regard to prices.
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To put it another way a lump sum contribution waiting for a market drop has no difference between you selling and waiting for a drop. Would you sell in order to wait for a drop?
There is a difference because that money is not in the market yet. As I said I never try to time the market with my existing portfolio that's already invested because people are bad at it and will lose money versus leaving their money alone. However, my CY contribution isn't in the market yet and I have to pick a time to enter at some point this year, so....
If I wasn't backdooring into my Roth I might set it up to contribute an even amount each month but doing that with the Roth conversion would greatly complicate things I think.