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Lump Sum Vs Dollar Cost Averaging
Posted on 9/5/14 at 8:45 am
Posted on 9/5/14 at 8:45 am
Just opened up a Roth through Vanguard for my wife and myself, both 24. Fully funded the $5,500 for each of us.
I saw in another thread that VTSMX was recommended. I'm between that or the 2055 retirement date fund (which I realize is about 63% VTSMX).
My question is would you just invest it all at one time or invest a portion of it over the rest of the year. Is $5,500 even enough to worry about DCA?
I appreciate any insight.
I saw in another thread that VTSMX was recommended. I'm between that or the 2055 retirement date fund (which I realize is about 63% VTSMX).
My question is would you just invest it all at one time or invest a portion of it over the rest of the year. Is $5,500 even enough to worry about DCA?
I appreciate any insight.
Posted on 9/5/14 at 10:37 am to SLafourche07
You are dollar cost averaging at once per year now. I guess the question is frequency. The driving concept of DCA is that more often is better. I personally $458.33 once per month. My Roth is also Vanguard and is comprised of Total Stock, Total Bond, and Total Int'l Stock. As I get older, I will slowly gravitate toward Bond. Target date funds are fine, assuming you agree with their approach and weightings over time.
Posted on 9/5/14 at 11:02 am to Dusty Bottoms
Thanks for the response.
I realize this. In future years, I will be contributing in monthly installments. I was just looking for opinions on if I should put the full amount in now, or let some sit in cash while I slowly start investing this years contributions.
I don't want to get into timing the market, but at the same time I realize the market is at an all time high.
quote:
You are dollar cost averaging at once per year now.
I realize this. In future years, I will be contributing in monthly installments. I was just looking for opinions on if I should put the full amount in now, or let some sit in cash while I slowly start investing this years contributions.
I don't want to get into timing the market, but at the same time I realize the market is at an all time high.
Posted on 9/5/14 at 12:13 pm to SLafourche07
quote:
I don't want to get into timing the market, but at the same time I realize the market is at an all time high.
If you are really going to DCA the first thing you need to do is basically ignore the market.
Of course, I wouldn't blindly DCA if say Tuesday there's a major attack and you think you should wait for the next day tank or something.
But if you start putting off buying for weeks or months at a time then you aren't DCAing any more.
Posted on 9/5/14 at 1:32 pm to Teddy Ruxpin
I wasn't suggesting not investing because the market was high. Just that SINCE the market is at an all time high should I take the money and invest it over say 5 months.
If the market was in a downturn I wouldn't be as worried about it because historically it will rebound.
If the market was in a downturn I wouldn't be as worried about it because historically it will rebound.
Posted on 9/5/14 at 2:01 pm to SLafourche07
Don't overthink it....
Flip a coin: Heads you DCA once a year tails you do it monthly.
On your time horizon, it's not really worth sweating over right now.
Flip a coin: Heads you DCA once a year tails you do it monthly.
On your time horizon, it's not really worth sweating over right now.
Posted on 9/5/14 at 3:53 pm to jso0003
quote:
On your time horizon, it's not really worth sweating over right now.
Exactly. In 40 years, the difference in the two decisions will look like a rounding error.
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