When to invest $5,500 in Roth IRA in 2014?

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matti
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When to invest $5,500 in Roth IRA in 2014?

Post by matti »

Hello. I have $5,500 that I plan to invest in my Roth IRA in 2014. My Roth contains only Vangaurd Life Strategy Growth Fund (VASGX, which is 80% stocks/20% bonds). I know prices are very high now, and it's possible they could drop soon. Or, of course, they could go up. We just don't know. I'm a pretty passive investor, and don't feel the need to be too "hands on." Any thoughts on if I should put the $5,500 right now? Or, should I spread it out over a few months?

Any input is appreciated. Happy New Year! And thank you.
Laura
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Laura »

Matti,

Market timing is a losers game. No one can know which direction the market will go. Pick a method of investing and stick with it so if you want to lump sum just do it today. If you don't like lump sum then set it up to invest monthly. Whichever you choose, do the same thing every year and don't guess which way the market is going.

I think for lump summing, experience has shown that sooner is better than later more times than not but you just never know. Remember, $5500 isn't a huge sum of money so it won't make much difference in your long term investing results.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
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wander
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by wander »

I would choose your second option especially after a year that stock market hit record.
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whaleknives
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by whaleknives »

This is a common topic - you might want to start with the Wiki entry: Dollar_cost_averaging_versus_lump_sum.
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WendyW
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by WendyW »

I had been planning to do my $5,500 Roth contribution tomorrow.

But now -- with the giant year-end rally that just happened -- I'm thinking that it might make sense to wait a week or two, for the likely pullback in equity prices.

Image

[puts on fireproof suit; awaits the replies of angry Bogleheads]
eddiejov55
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by eddiejov55 »

If you have the money ready-to-go, then invest right away. If that makes you uncomfortable then spread it out over a few months. As you said, no one knows what the market is going to do in the future. If you believe that as truth, then complete your 2014 Roth IRA contribution and relax. If it makes you feel better, I'll be tossing in $11,000 into 2 Roth IRA contributions for 2014 on Monday (Me and the Mrs). :)
dgdevil
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by dgdevil »

Same boat as you. I searched this topic here a few days ago. The overwhelming consensus favors lump sum on the first day of trading. Anything later than that, and their year will be ruined.
Angst
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Angst »

I'm in the "now", "life's too short", "it's not that much money", "studies show..." camp, or I guess that would be "camps". If this still bothers you, put it all in a money market fund in your IRA (or short term bond index fund) and then set up automatic exchanges with Vanguard out of the MM or Bond fund and into your equity (what was it?) fund in the IRA. Set it up to go over a few weeks, a few months, the year... whatever makes you happy. Then forget it! If you can... If you can't, maybe you need someone else to manage your funds. Timing the market is a loser's game, but people keep trying, and losing, even though they seem to convince themselves they're not. A lot of Bogleheads do too. Bad behavior, I'm afraid! Good luck. :)
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whaleknives
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by whaleknives »

Now, now. This forum supports dollar cost averaging, if you don't have the lump sum, or it makes you feel better. You're just not seen as a "completely rational investor." :)
"I'm an indexer. I own the market. And I'm happy." (John Bogle, "BusinessWeek", 8/17/07) ☕ Maritime signal flag W - Whiskey: "I require medical assistance."
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mhc
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by mhc »

I say do it now. I invested a good chunk on Dec 31, and I made my IRA contributions today. A good policy is to invest the money when you have it. Sometimes it will go up right away and sometimes it will go down right away. Either case should not matter much because over the long haul the expectation is that it will go up.

I have no interest in trying to time the market. In general, the more time you have your money in the market, the more you will earn.
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Cosmo
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Cosmo »

matti wrote:Hello. I have $5,500 that I plan to invest in my Roth IRA in 2014. My Roth contains only Vangaurd Life Strategy Growth Fund (VASGX, which is 80% stocks/20% bonds). I know prices are very high now, and it's possible they could drop soon. Or, of course, they could go up. We just don't know. I'm a pretty passive investor, and don't feel the need to be too "hands on." Any thoughts on if I should put the $5,500 right now? Or, should I spread it out over a few months?

Any input is appreciated. Happy New Year! And thank you.
I always like to wait to see what my year end bonus is (late March) as I may not qualify in making a contribution to a Roth. So far, I have always been (un)lucky every year and come in under the salary cap and have made the full contribution to a Roth. Otherwise, I don't bother with the timing of the purchase. The way I look at it, it all averages out in the end. Some years I may buy in at the year's low, other years it may be closer to the high.

Cosmo
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Grt2bOutdoors »

matti wrote:Hello. I have $5,500 that I plan to invest in my Roth IRA in 2014. My Roth contains only Vangaurd Life Strategy Growth Fund (VASGX, which is 80% stocks/20% bonds). I know prices are very high now, and it's possible they could drop soon. Or, of course, they could go up. We just don't know. I'm a pretty passive investor, and don't feel the need to be too "hands on." Any thoughts on if I should put the $5,500 right now? Or, should I spread it out over a few months?

Any input is appreciated. Happy New Year! And thank you.
When are you retiring? - 10, 20, 30 years from now? Put it all in tomorrow! The sooner the better, and thanks for the reminder, I need to do the same - tomorrow!
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Grt2bOutdoors »

WendyW wrote:I had been planning to do my $5,500 Roth contribution tomorrow.

But now -- with the giant year-end rally that just happened -- I'm thinking that it might make sense to wait a week or two, for the likely pullback in equity prices.

Image

[puts on fireproof suit; awaits the replies of angry Bogleheads]
Art Cashin - is that you??
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Topic Author
matti
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by matti »

Hi all. Thanks for the great feedback. I'm definitely leaning towards investing the money right away. I'm 34yo, so I don't think I'll be retiring for a while :)
Iorek
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Iorek »

Since I am backdoor Roth contributor, I like to put it all at once, then wait for market to drop before converting. ;)
Topic Author
matti
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by matti »

matti wrote:Hi all. Thanks for the great feedback. I'm definitely leaning towards investing the money right away. I'm 34yo, so I don't think I'll be retiring for a while :)
I decided to pull the pin. I just invested the $5,500. I wish you all a great 2014. Thanks.
alwayshedge
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by alwayshedge »

I just did a lump sum for 2014. No concern with what the market does since I have a 30 yr horizon until retirement.
gvsucavie03
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by gvsucavie03 »

matti wrote:
matti wrote:Hi all. Thanks for the great feedback. I'm definitely leaning towards investing the money right away. I'm 34yo, so I don't think I'll be retiring for a while :)
I decided to pull the pin. I just invested the $5,500. I wish you all a great 2014. Thanks.
What is wisest for you is what lies in your IPS. I'd suggest a revamp of this document since this probably isn't windfall money and is likely to happen again in 2015. Reading the Wiki carefully will help you with this in the future.

If the market is heading downward at the start of 2015 are you going to wait? If you wait, you could miss the low. If you invest at the start while it continues downward, you could lose some serious value, and on, and on, and on, and on, and on..... this is called market timing. It's easy to say right now, "go ahead and invest right now, I've got a lot of years...." based emotionally in the back of your mind on recent market performance, but it could easily change with a swing of the market/emotions. You need to put something down in stone that states exactly what to do from now on....

Not saying Lump Sum is better/worse than DCA, there is plenty of research to back up the real winner (left for YOU to decide which it is), but we all have to have a plan that, no matter what, no matter how much, no matter what the market conditions are, I will do THIS and THIS ONLY.
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Groundhog
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Groundhog »

We have $13000 going in our Roth IRAs tomorrow ($6500 x 2).
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avenger
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by avenger »

Lump sum through back door Roth. I rebalance at the same time - the lump sum of $5500 helps toward that end as well.
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [VTI, VXUS, VWITX, SV fund]
209south
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by 209south »

Sat down tonight with my two young adult children (24 and 22) and moved 2014s $5,500 to their ROTHs - put 100% in Prime MM, with $100/week being swept into LifeStrategy Growth - totally understand the lump-sum rationale but my daughter felt burned in 2008 when we made an initial investment (all equities) that rapidly lost 50%...she will never again do lump-sum.
pollodustino
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by pollodustino »

I set up automatic contributions once a week, plus two additional larger contributions the days after my paychecks clear twice a month. They alternate between the two funds I have in my Roth. It may be a bit overkill, but it works for me, and allows for better averaging and budgeting.
shaboob
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by shaboob »

DCA here. Maybe the lump sum is better in theory over the long haul, but since 401k contributions are monthly, HSA contributions are monthly, bills are monthly, etc., then it seems to make more sense to make Roth contributions monthly too.

I sleep better this way also.
Hope is not a strategy. That's why we have contingency plans.
mwm158
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by mwm158 »

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g$$
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by g$$ »

my opinion is that it is better to get it over with. if you dont feel comfortable doing it now then schedule a date 2 or 3 weeks from now and stick to it.
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by gkaplan »

I don't understand the hand wringing about investing your annual IRA contribution all at once. In the bigger scheme of things, $5,500 is nothing in the overall ending balance you are aiming for.
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Mike Scott »

I do not choose to DCA but that is how it works out with monthly auto deposits to the Roths.
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max12377
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by max12377 »

I just plopped mine in this morning. $5500 into VGSLX. I figure if we tank at least I'll get a decent dividend in the coming months. I'm also holding a good amount of dough in my 403b stable value which is ready for action if the opportunity presents itself..
shaboob
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by shaboob »

gkaplan wrote:I don't understand the hand wringing about investing your annual IRA contribution all at once. In the bigger scheme of things, $5,500 is nothing in the overall ending balance you are aiming for.
It's not that I wringing my hands over what happens to the 5500 once it goes in. I consider it "gone" and not accessible unless in an emergency. My goal is to smooth the cashflow out of my checking account.
Hope is not a strategy. That's why we have contingency plans.
letsgobobby
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by letsgobobby »

max12377 wrote:I just plopped mine in this morning. $5500 into VGSLX. I figure if we tank at least I'll get a decent dividend in the coming months. I'm also holding a good amount of dough in my 403b stable value which is ready for action if the opportunity presents itself..
Has that dough been rising long? Did it miss the oven of 2012-2013's monster rally in stocks?

Market timing is a loser's game.
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Blues
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Blues »

Another vote for lump sum.
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englishgirl
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by englishgirl »

If you think about it, lump summing your annual IRA contribution *is* a form of DCA. You're DCA'ing once a year over your 30-year working life (or however long it ends up being).

If I had the money ready to go, I'd do a lump sum. I don't, so I'll be investing paycheck by paycheck.
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720pete
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by 720pete »

Stupid question but what is DCA? Deferred compensation account?
Dario33
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Dario33 »

Lump sum for me - plan on doing it tomorrow actually (once the funds become available).
720pete
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by 720pete »

Here is the 2013 rally

Image

Image
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Tortuga
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Tortuga »

DCA = Dollar Cost Averaging
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Toons
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Toons »

matti wrote:Hello. I have $5,500 that I plan to invest in my Roth IRA in 2014. My Roth contains only Vangaurd Life Strategy Growth Fund (VASGX, which is 80% stocks/20% bonds). I know prices are very high now, and it's possible they could drop soon. Or, of course, they could go up. We just don't know. I'm a pretty passive investor, and don't feel the need to be too "hands on." Any thoughts on if I should put the $5,500 right now? Or, should I spread it out over a few months?

Any input is appreciated. Happy New Year! And thank you.
Invest Now.Forget where the market is. It is more about time invested not timing. I invested the first trading day of each New Year in Lifestrategy Growth in our Roth Iras for 14 years,1998-2011,before retiring.Where the market "was"at the time made no difference.Put the money to work for you as soon as you can.
By the way,my spouse and I have been rewarded with the investments we have made with the fund,no plans to sell.
Stay the course :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
barnaclebob
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by barnaclebob »

Roth IRA's are forced yearly dollar cost averaging over a period of 30+ years or until you hit income limits. Doing it over a period of months will not add much even when assuming you guess right and the market goes down while DCA'ing in a given year.
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by YttriumNitrate »

I edited your post to what it probably would have looked like a year ago :D :
matti wrote:Hello. I have $5,500 that I plan to invest in my Roth IRA in 2013. My Roth contains only Vangaurd Life Strategy Growth Fund (VASGX, which is 80% stocks/20% bonds). I know prices are up over 15% from last year, and with the sequester looming it's likely they will drop. Or, of course, they could go up. We just don't know. I'm a pretty passive investor, and don't feel the need to be too "hands on." Any thoughts on if I should put the $5,500 right now? Or, should I spread it out over a few months?
I'd just go with the lump sum.
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jh
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by jh »

.....
Last edited by jh on Wed Aug 21, 2019 1:59 pm, edited 1 time in total.
Retirement = 401k/Roth IRA (global balanced fund 75/25 AA using indexes) | Taxable (financial independence?) = Vanguard High Div Yield ETF (VYM)
robertalpert
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by robertalpert »

If prior to contribution that $5500 was already part of the 80/20 (within your taxable account), then invest it lump sum to keep your allocation.

If it is money from savings account, then that is a good rationale for time-diversification (DCA), but not over too long a time period, perhaps 3 to 5 months of dca.
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Toons
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Toons »

jh wrote:I always contribute the full amount for the Roth IRA as soon as I can each year. So this year I put the order in on Jan 1 (market was closed) to exchange $5,500 from my taxable money market account into my Roth IRA. That order will get processed today Jan 2 and the money will probably show up in the Roth IRA by Monday.
Excellent! :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
radeon962
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by radeon962 »

From an article about Warren Buffet:

What would Buffett do?

At the 2004 Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) shareholders meeting, Buffett was asked by one investor if he should buy Berkshire, invest in an index fund, or hire a broker.

Buffett delivered with his typical, common-sense rationale:

"We never recommend buying or selling Berkshire. Among the various propositions offered to you, if you invested in a very low cost index fund -- where you don't put the money in at one time, but average in over 10 years -- you'll do better than 90% of people who start investing at the same time."

An index fund? That's what the best stock picker in the world recommends?

Yes, and it wasn't the first time he answered with such simplicity. In another question-and-answer session, Buffett made his stance plain and clear:

"If you like spending 6-8 hours per week working on investments, do it. If you don't, then dollar-cost average into index funds. This accomplishes diversification across assets and time, two very important things."

So, let's get to the specifics. What's Buffett's favorite index fund?

"Just pick a broad index like the S&P 500. Don't put your money in all at once; do it over a period of time. I recommend John Bogle's books -- any investor in funds should read them.

They have all you need to know.

Vanguard. Reliable, low cost. If you're not professional, you are thus an amateur. [F]orget it and go back to work."

Avoid this big mistake

Buffett's pretty keen on helping people avoid big mistakes, just as he's all for helping investors make better decisions. Saying it as simply as he could, he opined on how having cash is one of the worst investments you could ever make:

The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Cash is going to become worth less over time. But good businesses are going to become worth more over time.

Of course, that's not to say that having a cash buffer for emergencies is a bad thing. However, having piles of cash -- tens upon tens of thousands of dollars in cash -- is a great way to guarantee a terrible return on a very large pile of money
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mhc
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by mhc »

robertalpert wrote:If prior to contribution that $5500 was already part of the 80/20 (within your taxable account), then invest it lump sum to keep your allocation.

If it is money from savings account, then that is a good rationale for time-diversification (DCA), but not over too long a time period, perhaps 3 to 5 months of dca.
From the polls I have seen on this site, $5500 would be less than 1% of most peoples portfolios. Lump sum it and be done with it.
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simplesimon
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by simplesimon »

With the way the market's performed, 70% of my $5,500 contribution is going into total bond fund because of rebalancing. Stick with your plan.
gvsucavie03
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by gvsucavie03 »

simplesimon wrote:With the way the market's performed, 70% of my $5,500 contribution is going into total bond fund because of rebalancing. Stick with your plan.
+1 - it's not about the lump sum/DCA, the real question is "is it part of my plan or is this an emotional decision based on recent market performance?"
tibbitts
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by tibbitts »

My answer would be sometime in early 2015, when the year's results are in the books and you've completed your 2014 taxes. For me, I'd need my December 2014 taxable account distributions to fully fund my CY2014 IRA, so it's not like the money would have been sitting around for a year.
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matti
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by matti »

YttriumNitrate wrote:I edited your post to what it probably would have looked like a year ago :D :
matti wrote:Hello. I have $5,500 that I plan to invest in my Roth IRA in 2013. My Roth contains only Vangaurd Life Strategy Growth Fund (VASGX, which is 80% stocks/20% bonds). I know prices are up over 15% from last year, and with the sequester looming it's likely they will drop. Or, of course, they could go up. We just don't know. I'm a pretty passive investor, and don't feel the need to be too "hands on." Any thoughts on if I should put the $5,500 right now? Or, should I spread it out over a few months?
I'd just go with the lump sum.
Awesome, I like that!
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Toons
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by Toons »

matti wrote:
YttriumNitrate wrote:I edited your post to what it probably would have looked like a year ago :D :
matti wrote:Hello. I have $5,500 that I plan to invest in my Roth IRA in 2013. My Roth contains only Vangaurd Life Strategy Growth Fund (VASGX, which is 80% stocks/20% bonds). I know prices are up over 15% from last year, and with the sequester looming it's likely they will drop. Or, of course, they could go up. We just don't know. I'm a pretty passive investor, and don't feel the need to be too "hands on." Any thoughts on if I should put the $5,500 right now? Or, should I spread it out over a few months?
I'd just go with the lump sum.
Awesome, I like that!
If you didn't lump sum today then you have tomorrow.Once you make the purchase you can move on and think about something else :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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matti
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Re: When to invest $5,500 in Roth IRA in 2014?

Post by matti »

Toons wrote:
matti wrote:
YttriumNitrate wrote:I edited your post to what it probably would have looked like a year ago :D :
matti wrote:Hello. I have $5,500 that I plan to invest in my Roth IRA in 2013. My Roth contains only Vangaurd Life Strategy Growth Fund (VASGX, which is 80% stocks/20% bonds). I know prices are up over 15% from last year, and with the sequester looming it's likely they will drop. Or, of course, they could go up. We just don't know. I'm a pretty passive investor, and don't feel the need to be too "hands on." Any thoughts on if I should put the $5,500 right now? Or, should I spread it out over a few months?
I'd just go with the lump sum.
Awesome, I like that!
If you didn't lump sum today then you have tomorrow.Once you make the purchase you can move on and think about something else :happy
Thanks. I lump summed last night!
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