Roth Contributions Question | TigerDroppings.com
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Lsut81
USA Fan
Member since Jun 2005
66074 posts

Roth Contributions Question

With how high the market is right now, would it be better to max out your 2013 Roth contribution right now, or just do $500 a month, in case there is a pull back


TigerDeBaiter
LSU Fan
Member since Dec 2010
3165 posts

re: Roth Contributions Question
Really doesn't matter unless you have a better place for your money at the moment.

You don't have to invest in anything particular once you deposit into a Roth.


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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
58939 posts

re: Roth Contributions Question
quote:

in case there is a pull back


What if there isn't a pull back? It drives me fricking nuts to hear people say these things. There are times in an investing life where people can make decisions:

1. Market is all time high: people are scared to invest. Yet over my career, that mark is always eclipsed.

2. Market is too low: this is THE ideal buying opportunity, yet people again are scared as frick



Lsut81
USA Fan
Member since Jun 2005
66074 posts

re: Roth Contributions Question
quote:

What if there isn't a pull back?


I just didn't know if it was smart to go all in or pepper the investment over time


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stonerolledaway
UNO Fan
baton rouge
Member since Jul 2011
851 posts

re: Roth Contributions Question
just stay the course, why would you lump sum in when it is supposedly high? of course, it could go much higher or much lower, just keep to your plan, steady payments over time seem to even out the highs and lows over time resulting in a lower overall price paid in the long run...


foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
31937 posts

re: Roth Contributions Question
I can't time any market very well and doubt anyone else can either, so I say go right ahead.

FWIW you don't to invest in US stocks. You can invest in a fund specializing in Malaysian junk bonds if you like. Or you can just contribute to the Roth and let it sit in cash.

But if you have the ability to do so, go ahead and get the money in the Roth, then I highly recommending thinking through a long-term investment strategy that involves more than just the US stock market.


Lsut81
USA Fan
Member since Jun 2005
66074 posts

re: Roth Contributions Question
quote:

But if you have the ability to do so, go ahead and get the money in the Roth, then I highly recommending thinking through a long-term investment strategy that involves more than just the US stock market.


Roth is in a Vanguard 2040 fund

I've got $5500 cash on hand, just deciding whether to put it all in a max out 2013, or to do $500 a month.


TyOconner
Troy Fan
NOLA
Member since Nov 2009
10265 posts

re: Roth Contributions Question
Yes, but what you are not understanding is that it doesn't matter even the slightest whether you put it all in now or spread it out.


Lsut81
USA Fan
Member since Jun 2005
66074 posts

re: Roth Contributions Question
quote:

it doesn't matter even the slightest whether you put it all in now or spread it out.




How doesn't it?

I put in 5k right now and buy 500 shares of X... In 4 months the market retreats 20%, my investment is now worth 4K and equivilant to buying 400 shares.

or

I put in 2k or 200 shares for the next four months and the market does the same thing, I lose $400 of value, but my next contributions have more buying power and over the next four months I am able to buy more shares with my money to level out the losses when the prices increase.

Maybe I'm looking at it wrong. Sure if the market continues to go up, I miss out, but I am somewhat mitigating a large loss.

Again, new to all the investing stuff.


TheDiesel
LSU Fan
Houston via Baton Rouge
Member since Feb 2010
2505 posts

re: Roth Contributions Question
A great argument can be made about dollar cost averaging. But it is up to you in the end.


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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
58939 posts

re: Roth Contributions Question
You gonna sell your house to get out from under it if the value declines $10,000 on your next appraisal? Or are you going to keep living in it knowing the reason you bought it?


Lsut81
USA Fan
Member since Jun 2005
66074 posts

re: Roth Contributions Question
quote:

You gonna sell your house to get out from under it if the value declines $10,000 on your next appraisal? Or are you going to keep living in it knowing the reason you bought it?



I completely understand that thinking... I am 25-30yrs away from retiring (hopefully) and know the markets will always correct themselves, but was just wondering if dollar cost averaging was worth it or not


jso0003
Auburn Fan
Birmingham/Atlanta
Member since Jun 2009
5168 posts

re: Roth Contributions Question
def not worth it especially once you consider transaction costs on a monthly basis


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Broke
LSU Fan
AKA Buttercup
Member since Sep 2006
58939 posts

re: Roth Contributions Question
quote:

but was just wondering if dollar cost averaging was worth it or not


Sure it is worth it. But you have lump sum now. You have to take into account the time value of money. If I were in your shoes I would invest and forget about it for 3 years.

**This is not investment advice and should not be construed as investment advice**


Lsut81
USA Fan
Member since Jun 2005
66074 posts

re: Roth Contributions Question
quote:

Sure it is worth it. But you have lump sum now. You have to take into account the time value of money. If I were in your shoes I would invest and forget about it for 3 years.





quote:

**This is not investment advice and should not be construed as investment advice**


I wouldn't take advice from you anyways...

Just sayin


TyOconner
Troy Fan
NOLA
Member since Nov 2009
10265 posts

re: Roth Contributions Question
Obviously you are gonna make something if you put it all in now and the market rises and you will lose if it plays out the opposite way. You are pretty much asking people to time the market for you which is impossible. Therefore, if you buy and hold(def what you need to do) then the time at which you initially invest matters almost none.


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Ace Midnight
LSU Fan
Between sanity and madness
Member since Dec 2006
39114 posts

re: Roth Contributions Question
quote:

just keep to your plan, steady payments over time seem to even out the highs and lows over time resulting in a lower overall price paid in the long run...



If only there was a name and math associated with this phenomenon...

Dollar Cost Averaging


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