Taxable account - Monthly vs Annual Contribution

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Faisal
Posts: 32
Joined: Sun Dec 18, 2016 6:37 pm

Taxable account - Monthly vs Annual Contribution

Post by Faisal » Fri May 19, 2017 10:55 am

Relatively new read of the forum. Asked a few questions earlier. Set up a brokerage account at vanguard using a modified strategy bogleheads recommend.

Now I was wondering if I should make monthly contributions to the account or one large lump sum at the end of the year. I am not sure which would be more cost effective/tax effective.

Advice would greatly appreciated;

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: Taxable account - Monthly vs Annual Contribution

Post by livesoft » Fri May 19, 2017 11:02 am

Since there is no cost and really no taxes, you should invest as soon as you have the money. If it is once a year in January, do that. If it is every month when you get money, do that.
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flamesabers
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Re: Taxable account - Monthly vs Annual Contribution

Post by flamesabers » Fri May 19, 2017 11:04 am

I think monthly is preferable to annual contributions. It's better to get your money invested in the market and work for you sooner then later. Plus, I think it's easier to get into the habit of investing when you do it every month vs. once a year.

The only time I do annual contributions is for my IRA and I do that at the start of each year (rather then the end).

RRAAYY3
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Re: Taxable account - Monthly vs Annual Contribution

Post by RRAAYY3 » Fri May 19, 2017 11:10 am

I do at least once a month, get in at different price points - buy more shares when its cheaper, buy less when it's more expensive with the same amount of money (I throw in different amounts, basically once bills are paid and I budget for weekends/occasions - the rest goes to total us admiral and see ya in 30 years.

Admiral
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Re: Taxable account - Monthly vs Annual Contribution

Post by Admiral » Fri May 19, 2017 11:16 am

Faisal wrote:Relatively new read of the forum. Asked a few questions earlier. Set up a brokerage account at vanguard using a modified strategy bogleheads recommend.

Now I was wondering if I should make monthly contributions to the account or one large lump sum at the end of the year. I am not sure which would be more cost effective/tax effective.

Advice would greatly appreciated;


Well I tend to agree monthly, but of course one has to ask: what would you be doing with the money for the 11 months out of the year that it's not in your taxable account? Is it in the mattress? Does it earn interest? If so, how much? Presumably it's in something safe that has a relatively low return (bank account, CD) so over the long run stocks will tend to outperform that investment.

Taxes on investments are only due once a year (or so the IRS tells me), so when you put the money in is immaterial except in the mental accounting sense that dividends on TSM are quarterly, so if there's no money invested, there are no dividends that quarter.

And I agree with the above poster that putting in a set amount per month helps naturally reduce the urge to time the markets, as one might try to do with a lump sum.

Faisal
Posts: 32
Joined: Sun Dec 18, 2016 6:37 pm

Re: Taxable account - Monthly vs Annual Contribution

Post by Faisal » Fri May 19, 2017 11:26 am

Thank you guys. That is really helpful and the logical reason helps. Monthly contribution it is.

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