|
"Time in the market beats timing the market"
11-18-2020, 11:05 PM
|
#1
|
Dryer sheet wannabe
Join Date: Nov 2020
Posts: 13
|
"Time in the market beats timing the market"
I've heard this phrase thrown around lots of places and makes complete sense. You cannot time the market, but that said, is it best to periodically contribute to your portfolio throughout the year? or all at once?
Lets say you plan to contribute 12k each year. Is it best to contribute $1000 per month throughout the year (maybe even $500 per paycheck to spread the contributions even further). Or would it be best to throw all 12k in the beginning of January and forget about it!. I'm learning towards 12k all at once and then contributing any extra cash I might come into throughout the year. Maybe tax-refund, bonuses, gifts, ect... so 12k then whatever extra money I have periodically buy a few shares here and there.
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
11-18-2020, 11:21 PM
|
#2
|
Thinks s/he gets paid by the post
Join Date: Oct 2020
Location: Sugar Land, Texas
Posts: 1,245
|
I prefer to put as much as possible as soon as I have the funds. That way, it grows faster and if it goes up then eventually it will come up.
|
|
|
11-19-2020, 12:04 AM
|
#3
|
Recycles dryer sheets
Join Date: Aug 2018
Posts: 265
|
It's really a personal preference. Some people like to stretch out their contributions over the 12 month period. Nothing wrong with either way.
|
|
|
11-19-2020, 04:46 AM
|
#4
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2015
Location: Michigan
Posts: 5,003
|
On average earlier is better.
__________________
"The mountains are calling, and I must go." John Muir
|
|
|
11-19-2020, 05:33 AM
|
#5
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,725
|
Periodic investing goes down smoother IMO. This helped when building 401(k), SEP-IRA and Roth accounts over many years.
If you put 12K into the market in Jan then you might think of constantly comparing that decision to periodic investing in the same year. I suppose you could lump sum 6K into an account early Jan, and then do periodic investing each month by having automatic withdrawals to the investing account for comparison.
We set spouse Roth to receive $500 each month from checking. This has less impact on cash flow. But it is just a personal preference. What works for most may not work for you.
|
|
|
11-19-2020, 05:48 AM
|
#6
|
Thinks s/he gets paid by the post
Join Date: Oct 2014
Posts: 1,544
|
Quote:
Originally Posted by target2019
If you put 12K into the market in Jan then you might think of constantly comparing that decision to periodic investing in the same year. I suppose you could lump sum 6K into an account early Jan, and then do periodic investing each month by having automatic withdrawals to the investing account for comparison.
|
Conversely if you dollar cost avg and put in $1000/mo you might constantly compare that decision to see if putting all $12k in at once would have been the better option. Second guessing works both ways.
__________________
-Big Dawg-FI since 9/2010. Failed ER in 2015. 2/15/2023=DONE! "Blow that dough"-Robbie
" People say I'm lazy, dreaming my life away Well, they give me all kinds of advice designed to enlighten me When I tell them that I'm doing fine watching shadows on the wall "Don't you miss the big time, boy. You're no longer on the ball" -John Lennon-
|
|
|
11-19-2020, 06:08 AM
|
#7
|
Thinks s/he gets paid by the post
Join Date: Dec 2014
Location: St. Charles
Posts: 3,919
|
If you have $12,000 available in January, why didn't you invest it last year?
__________________
If your not living on the edge, you're taking up too much space.
Never slow down, never grow old!
|
|
|
11-19-2020, 06:14 AM
|
#8
|
Full time employment: Posting here.
Join Date: May 2007
Posts: 883
|
Quote:
Originally Posted by DrRoy
On average earlier is better.
|
+1
For the past 30 years I've tracked our monthly net worth. In 267 months, or 72% of the time, it increased. And, in 103 months, 28% of the time, net worth declined.
I'd take the odds and put it all in at once, too, but it's a personal decision!
__________________
"It is better to have a permanent income than to be fascinating". Oscar Wilde
|
|
|
11-19-2020, 06:24 AM
|
#9
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,725
|
Quote:
Originally Posted by Bigdawg
Conversely if you dollar cost avg and put in $1000/mo you might constantly compare that decision to see if putting all $12k in at once would have been the better option. Second guessing works both ways.
|
YMMV. I'm sure there are those who track these things in either direction. Nyself, I would track the 12K early-Jan bet but not pay attention to the (12) 1-K wagers evenly spread throughout the year. As I mentioned, it's personal preference, what works for you, and so on.
|
|
|
11-19-2020, 07:06 AM
|
#10
|
Thinks s/he gets paid by the post
Join Date: Oct 2017
Location: Tellico Village
Posts: 2,622
|
It's a personal decision based on a person's viewpoint of market gains or losses. Track record is to lump sum for better results. If you would capitulate on a lump sum if it showed an immediate loss, then dollar cost average is better for you.
VW
__________________
Retired May 13th(Friday) 2016 at age 61.
|
|
|
11-19-2020, 07:31 AM
|
#11
|
Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
|
Invest money when you have it. Withdraw money when you need it. Not much more complicated than that.
__________________
Consistently sets low goals and fails to achieve them.
|
|
|
11-19-2020, 07:45 AM
|
#12
|
gone traveling
Join Date: Jan 2019
Location: NW Ohio
Posts: 1,156
|
If you are holding cash until you can make one large, annual, lump sum deposit, you are missing out on gains throughout the year that you would have had with smaller monthly/bi-monthly deposits.
|
|
|
11-19-2020, 11:06 AM
|
#13
|
Thinks s/he gets paid by the post
Join Date: Jul 2006
Location: Denver
Posts: 3,519
|
+1
Unless this $12k is an annual bonus, you should be investing as the money accumulates. I had automatic monthly investments in my mutual funds & I think it helped me immensely by taking that monthly decision out of my hands.
|
|
|
11-19-2020, 11:07 AM
|
#14
|
Thinks s/he gets paid by the post
Join Date: Jan 2020
Location: Milwaukee
Posts: 4,053
|
IIRC, the statistics are something like 2/3 of the time, a lump sum in Jan. beats a 12-month DCA. But you have to know yourself to know whether the other 1/3 of the time would bother you or not.
|
|
|
11-19-2020, 11:59 AM
|
#15
|
Thinks s/he gets paid by the post
Join Date: Jul 2013
Posts: 1,884
|
Lump sum.
|
|
|
11-19-2020, 12:28 PM
|
#16
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,351
|
Every buy or sell decision is "market timing" to some degree. I think DCA has a psychological attraction in that there is no one big decision to trumpet or regret. A DCA-er may miss a profit opportunity but we humans are much more sensitive to losses than we are to gains. So DCA is a very human solution to the timing problem.
__________________
Ignoramus et ignorabimus
|
|
|
11-19-2020, 01:41 PM
|
#17
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,228
|
My rationale to invest immediately is that I have an AA to manage volatility. I don't worry about volatility risk in a specific segment of my money, even if it is new. Think big picture.
Put another way, suppose you DON'T have $12K to invest at the start of the year. Would you take $12K out of your investments and then trickle it back in? Probably not, right? There's really no difference between new money and money that you already have invested, except for the human emotion of fear of that one big decision not working out. I try to invest logically, not emotionally.
But if DCA helps you sleep better, do it. Your money is your own business.
|
|
|
11-19-2020, 02:38 PM
|
#18
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 17,930
|
I probably wouldn't be the one to make the case, but "one" could make a case that in times like right now, when the market is volatile, it might make sense to go all in on a big dip. Other than that, I would invest when I have the money - within the confines of my AA. More than ever, YMMV.
__________________
Ko'olau's Law -
Anything which can be used can be misused. Anything which can be misused will be.
|
|
|
11-19-2020, 04:29 PM
|
#19
|
Recycles dryer sheets
Join Date: Nov 2017
Posts: 107
|
Quote:
Originally Posted by Out-to-Lunch
IIRC, the statistics are something like 2/3 of the time, a lump sum in Jan. beats a 12-month DCA. But you have to know yourself to know whether the other 1/3 of the time would bother you or not.
|
Yes, you recall correctly. The difference depends on the time frame considered, but generally speaking, investing earlier is better most of the time. I just posted this to another thread asking a variation of the same question.
https://ofdollarsanddata.com/lump-sum-investing/
|
|
|
11-19-2020, 07:49 PM
|
#20
|
Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 4,366
|
I like to invest as soon as possible. 12k invested in January is in the market longer than 1k/month throughout the next year. On average that should be better.
My one concession to timing is to buy more equities during a bear market. I'll shift my AA a little bit to equities and leave it until the market recovers. That's the one time I'm pretty sure what the market will do, eventually. No big moves, maybe 5% of the portfolio at a time. That leaves bonds/cash to buy more if the market continues down, or to finance expenses if the bear drags on for a long time. Hopefully that makes up for my 25% bond allocation because I'd rather be all equities.
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|