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How do you invest in IRA - Dollar Cost Averaging or Lump Sum?
Old 03-28-2009, 01:25 PM   #1
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How do you invest in IRA - Dollar Cost Averaging or Lump Sum?

I usually do lump sum a couple weeks or so before the contribution deadline. However, I'm wondering what people on here tend to do and if DCA is a better/safer approach.

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Old 03-28-2009, 01:30 PM   #2
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I get paid twice a month. On each payday I transfer $416.66 from checking into a Roth, alternating between my wife's and mine so that each gets $416.66 per month, and then I invest accordingly.

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 03-28-2009, 01:32 PM   #3
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Lump sum into the cash sweep, then decide how to work the money into our asset allocation.
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Old 03-28-2009, 02:48 PM   #4
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Those who lumped in last year got lumped! That includes me and
the inheritance I received in early September after the market had
already fallen quite a bit. I in my infinite wisdom decided that we
were at or near a bottom and the danger was remote. Then came
the "bottom" in November followed by the "real" bottom in early
March. Do you see a pattern here? The benefit of DCA is to avoid
investing at a market top. Studies over the years have shown that,
statistically, lumping in has a marginally higher return, but my advise
is don't be greedy......particularly if you are talking about a large sum
like an IRA roll-over.

You may miss some of the turnup we are presently enjoying but who
knows what's coming down the road?


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Old 03-28-2009, 03:17 PM   #5
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I lump sum at the beginning of every year. I don't think there's a significant advantage either way. I do a lump sum at the beginning of the year because I don't have a large cash reserve and putting the max in all at once at the beginning of the year forces me to get my cash savings back up quickly. It's just a personal choice. It also eliminates the possibility of spending the money on something else and not maxing the IRA.
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