Newbie investor - Roth IRA Account Set UP Timing?

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2dog2cat
Posts: 1
Joined: Wed Oct 11, 2017 5:12 pm

Newbie investor - Roth IRA Account Set UP Timing?

Post by 2dog2cat » Thu Oct 12, 2017 6:02 pm

Hi everyone,

I recently started reading investment books and came across this wonderful forum! After reading The Boleheads' Guide To Investing, I decided to set up a Roth IRA account. I already have a Roth 401K account with my company. My question is should I set it up now or wait and see if the "market correction" will happen by the end of this year? I know we should not time the market but still hesitate since the market is so high right now.

My current 401k account is with Vanguard so I will probably open the Roth IRA account with Vanguard too. Can I contribute 3000 now and another 2500 at the end of this year?

Thank you!

EHEngineer
Posts: 524
Joined: Sat Feb 28, 2015 4:35 pm

Re: Newbie investor - Roth IRA Account Set UP Timing?

Post by EHEngineer » Thu Oct 12, 2017 6:57 pm

Welcome to Bogleheads.

We invest in the market because we expect it to keep setting new highs. You need to have a portfolio that you are comfortable investing in at both highs and lows. If you aren't comfortable, then you should reconsider the portfolio you've chosen. Do that, then invest immediately.

You can contribute to the roth in as many chunks as you want. The 2017 contribution window goes all the way to April 15, 2018 (yes 2018).

Good luck.
Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius

billfromct
Posts: 481
Joined: Tue Dec 03, 2013 9:05 am

Re: Newbie investor - Roth IRA Account Set UP Timing?

Post by billfromct » Thu Oct 12, 2017 8:35 pm

As you noted, Vanguard "investor" funds require $3,000 to open but the Target Retirement funds can be opened with $1,000. The Star Fund also requires $1,000 to open as well.

Why not just dollar cost average (DCA) each month after the initial opening deposit?

bill

mega317
Posts: 895
Joined: Tue Apr 19, 2016 10:55 am

Re: Newbie investor - Roth IRA Account Set UP Timing?

Post by mega317 » Fri Oct 13, 2017 12:05 am

2dog2cat wrote:
Thu Oct 12, 2017 6:02 pm
I know we should not time the market but
You answered your own question here, obviously. There will be a correction. That correction might not happen for a while and then may bring prices down to a point that is still above todays'.

Searching this forum for "time the market but" produces 1,000 results. I would guess most of those threads produced the same responses you'll get in this one. No one can successfully time the market, so just invest. Dollar cost averaging is mathematically inferior but is not nearly as bad as timing, and the psychological benefit may be worth it.

Let's also be clear: timing the market with a few thousand over the course of a few months will have 0 impact on your long term plans. This 5500 could drop by 90% and you'll still have (I'm assuming) many many years of contributions to make up for it. To me the biggest drawback of your plan is that it could work, and then you'll have a positive reinforcement of a bad habit.

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