I don't believe in market timing, but every year I wait to contribute for my backdoor Roth...

[EricaInvestPink]

I claim not to believe in market timing. Yet every year, I put my money into my traditional Roth (money market) and then convert the account to Roth, usually completing this process by January 10th or so. But I don't actually buy VTSAX using these funds until I feel the market dips a little bit, which ends up being some time between March and as late as October. This has proven to be a bad decision for just about every year except 2020, when waiting till April ended up being beneficial. But probably not enough to overcome the lost gains from all the previous years of doing this.

How do I stop? Do any of you have this issue?

[Robert20]

I claim not to believe in market timing. Yet every year, I put my money into my traditional Roth (money market) and then convert the account to Roth, usually completing this process by January 10th or so. But I don't actually buy VTSAX using these funds until I feel the market dips a little bit, which ends up being some time between March and as late as October. This has proven to be a bad decision for just about every year except 2020, when waiting till April ended up being beneficial. But probably not enough to overcome the lost gains from all the previous years of doing this.

How do I stop? Do any of you have this issue?

if you are investing 6K every year (say Roth max), buy once on 2nd Jan OR buy 10 times in January (alternate days - equal amount).

[Longdog]

I claim not to believe in market timing. Yet every year, I put my money into my traditional Roth (money market) and then convert the account to Roth, usually completing this process by January 10th or so. But I don't actually buy VTSAX using these funds until I feel the market dips a little bit, which ends up being some time between March and as late as October. This has proven to be a bad decision for just about every year except 2020, when waiting till April ended up being beneficial. But probably not enough to overcome the lost gains from all the previous years of doing this.

How do I stop? Do any of you have this issue?

Erica, you are forgiven for your transgressions. The first step is acknowledging you have a problem, so congratulations! I don't think this is going to make a big difference in your life, one way or the other, but I do have a possible suggestion if you also have a 401k.

Do you have a 401k that you contribute to?

[arcticpineapplecorp.]

this is a good question. I had a friend who told me he was waiting until 1/6/2021 because he was expecting a "dip" in the market due to the event that happened on 1/6/2021.

I threw out some questions to him to help him think about how insignificant his market timing would be (thus, just invest and get it over with and get on with your life):

We're talking $6000 contribution (he's under 50).

1. Say the market does "dip". First off, define the amount of a dip. He couldn't. I think of LESS than 10% as a dip, because 10% is usually called a correction, right? 20% is a bear market right? So what's a dip? Less than 10%?

2. Say the market falls 10%. You're buying at a 10% discount. Is that going to be life changing? When the market gets back you've made 11.1% on your money. How much money? 11.1% of $6000 is $666.

3. Is it worth waiting (while the market goes up potentially) to just make $666?

4. Say you instead invest at the beginning of the year ($6000) and the market does dip and falls 10%. How much do you stand to lose? $600. That gonna keep you from retiring? No.

5. So he was greedy, but really not that greedy when you look at the amount he stood to gain ($666)...because he was fearful of losing $600?

6. Say the market doesn't dip (which it didn't this year. It went up between the 4th (first day he could have invested) and the 6th. He just missed an opportunity to make money. He would have seen the market didn't dip and the next soonest he would have gotten in would have been on the 7th. The market went up 1.8% while waiting between 1/1/2021-1/7/2021 (source: http://quotes.morningstar.com/chart/fund/chart?t=VTSAX).

7. Waiting may have cost him 20% of his yearly return (if you look at 10% annual returns since 1926).

8. People like to say the market has gone up 75% of the time (on a yearly basis) so the odds are in your favor that the market moves higher, so get invested sooner rather than later. The market I believe goes up daily more often than not (51% of the time I believe) so again the odds are slightly in your favor on a daily basis. Every day matters.

9. Now the same people will say even though the market goes up more than it goes down, there are intrayear losses every year. This is true. Average intrayear losses have been around 14% since 1980. But the thing is:

10. you don't know when the intrayear decline will be.

11. you don't know how long that intrayear decline will last (markets can correct quickly sometimes and you lose out).

12. you might think you'll buy on the dip, but you might be waiting for more of a dip and then the market corrects (and you've lost out). Greed cost you.

13. you might not have the courage of your convictions if the market falls and you're fearful, rather than greedy.

That's what I told him.

I'm not invited many places obviously.

[tomsense76]

Well historically the market has ended the year up over 80%. Here's data from the past ~40 years backing this up. Honestly it's hard to get odds any better than this when it comes to investing. Also keep in mind that years are things we define by convention picking a different window would show the same thing. The sooner one gets their money in the more of that growth they can enjoy. Further in a several decade investing career it won't be so much the dips that matter, but the consistent early contributions that do.

[livesoft]

We don't contribute to IRAs until the money is earned. That takes many months since our earned income is low and does not involve market timing.

[asset_chaos]

Don't look at what the stock market is doing. I don't seek to know how the market or my portfolio is doing more than a couple of times a year. Most times I don't know if the market has dipped or soared unless it's moved enough that bogleheads start to talk about it as such.-)

If you can't ignore the stock market, perhaps try also investing in some small amount of bonds in your roth. Then, instead of dips, obsess about rebalancing. See how fast can you get the new money invested to get back to a 90:10 balance, or whatever. It's better than leaving uninvested cash sit around, and maybe it's a way to train yourself into more productive thought patterns.

[exodusNH]

I'm not invited many places obviously.

[eye.surgeon]

I claim not to believe in market timing. Yet every year, I put my money into my traditional Roth (money market) and then convert the account to Roth, usually completing this process by January 10th or so. But I don't actually buy VTSAX using these funds until I feel the market dips a little bit, which ends up being some time between March and as late as October. This has proven to be a bad decision for just about every year except 2020, when waiting till April ended up being beneficial. But probably not enough to overcome the lost gains from all the previous years of doing this.

How do I stop? Do any of you have this issue?

Every year I do a backdoor roth for my wife and myself, $14k because we are over 50, usually completed by the 4th or 5th of January, and I just assume the market will drop shortly after and this year did not disappoint

[burritoLover]

It's exhausting having to follow the markets on a daily basis to make sure you catch a correction. Think of how much your time is worth and how much time you're wasting on this.

[CyclingDuo]

I claim not to believe in market timing. Yet every year, I put my money into my traditional Roth (money market) and then convert the account to Roth, usually completing this process by January 10th or so. But I don't actually buy VTSAX using these funds until I feel the market dips a little bit, which ends up being some time between March and as late as October. This has proven to be a bad decision for just about every year except 2020, when waiting till April ended up being beneficial. But probably not enough to overcome the lost gains from all the previous years of doing this.

How do I stop? Do any of you have this issue?

I would just lump sum it in and be done with it in January like you have been doing. Plus you are hopefully investing from every paycheck throughout the year into your 401k (or 403b/457b).

Put those two strategies together, and just be like Sarah over your decades of working...

https://imgur.com/gallery/BlK4jzM

CyclingDuo

[placeholder]

Are you actually investing after a dip from the time of investment or just a dip from recent values because there are many points in the various markets where prices have gone up and never gone below that point subsequently.

[AllMostThere]

How do I stop?

Every year in Janaury repeat 10 times to yourself "Time in the market is more important that timing the market"
Then invest fully and be done with it.

[Jermbo]

Do you have the same issue with regular investments each paycheck or monthly?

Just think of it this way...your Roth is dollar cost averaged on an annual basis and your other investments throughout the year are DCA’d on a biweekly or monthly basis. If you don’t wait when you invest on a biweekly/monthly basis why do you need to wait on annual basis?

The post above is best advice on “time in the market is more important than timing the market”. Just get the money invested and move on because if you wait you’ll constantly wonder when the dip is coming, if it does at all. When it does come and you invest, it may dip further. Also it could be a dip that is starting above when you started waiting and it could potentially not even dip below when you could have invested in the first place.

[novemberrain]

I claim not to believe in market timing. Yet every year, I put my money into my traditional Roth (money market) and then convert the account to Roth, usually completing this process by January 10th or so. But I don't actually buy VTSAX using these funds until I feel the market dips a little bit, which ends up being some time between March and as late as October. This has proven to be a bad decision for just about every year except 2020, when waiting till April ended up being beneficial. But probably not enough to overcome the lost gains from all the previous years of doing this.

How do I stop? Do any of you have this issue?

Would stopping to think of time as yearly buckets help? I mean there is nothing special about Jan 1st and dec 31st. It is just 2 random points in time.

[EricaInvestPink]

Thank you everyone! Guess I needed to just hear it even though I "knew it." Can read about time in market vs timing in the market 100x, but maybe the 101st time it sank in for me Just bought VTSAX with the Roth contribution and didn't think about it. Won't check the market tomorrow. BUT - you all can expect a market drop tomorrow since I bought (or maybe Thursday? since my buy won't go through until close tomorrow.)

Also I think this is the best part of my 401k - I just set it to contribute automatically and I don't think I ever really thought about it! Maybe I should do the same thing for Roth, but then again I don't think there is a way to automate backdooring it.

[dboeger1]

I have a similar habit whenever I buy in my taxable account. I don't really know why. But when it comes to tax-advantaged accounts, I don't play those silly market timing games.

The way I rationalize buying immediately and holding in those is that tax-advantaged space is limited and precious. It may not seem like it to people who don't max out retirement account contributions, but for super savers, you only get so much of it per year. Also, those funds are pretty much committed to long term investments because of early withdrawal penalties. So in the grand scheme of things, you have these accounts that are highly advantageous when it comes to tax free growth, the money is set aside for decades in my case, and I've seen the data supporting long term buy and hold. Why would I ever risk my precious tax advantaged space to try to gain a slight advantage I know I probably can't get that would ultimately be negligible in 30+ years? It just doesn't make sense. I want to give those accounts the best chance to grow over many years as I can.

Once I've maxed out those contributions and I'm ready to put money in taxable, that's when I give myself permission to mess around with buying the dip. There's absolutely no logical reason to support doing this. Still, if you get lucky and time well, those extra funds are more reasonably available in the shorter term without severe penalty, so while market timing may not be optimal, it's probably no worse than putting money into a slot machine in Vegas, a hobby I enjoy more than I care to admit

[thousandaire]

I'm laughing because I do this every single year. Currently holding my $6000 waiting to pounce on that dip that I have zero evidence for...

Don't beat yourself up about it--I don't. It's human nature, and it won't make much of a difference in the long run assuming you have other investments. Your 401k is technically dollar-cost-averaging into the market, but no one seems to have a problem with that. If this is your worst "un-Bogleheadly" behavior, you'll be just fine my friend.

[aristotelian]

With backdoor especially I can see the appeal of wanting to get it done in one transaction. If you want to do it without market timing, you could start the year with $6k in cash or short bonds in the Roth, then reduce the cash as your liquid cash rises to $6k. At any point in time you will have $6k between your Roth and your savings account. Also, if you do this every year you aren't really market timing. Not sure what you call it but not that.

[illumination]

A regular poster here had this to say in a different thread that caught my eye:

You can try this, but others won't like it:

Do some research and find out if there has ever been year when either Total US Stock Market Index OR Total Int'l Stock Market index did NOT fall at least 5% below the value AFTER the 1st trading day of the year. (Hint: I know of one year when the low point of the year for the Total US index was the first possible trading day, but not for the Total Int'l in that same year.)

Then just wait until a 5% drop happens in one of those 2 funds and contribute your Roth IRA on that date and buy that fund.

This might be easy market timing, but you gotta do your research first.

Maybe that's actionable, maybe it's not. I do know looking back, I regret not just dropping funds in and investing as soon as possible and not trying to squeeze these little things out. But seeing this, it makes me wonder if I should engage in just a bit of market timing here.

[decapod10]

I think it's relatively harmless personally, it's like an even more benign version of the "5% play money" principle. If you want to stop, of course it's probably better just to lump sum right at the beginning of the year, but if this allows you to scratch that itch in terms of "trading", then it's fine.

[OnTopOfaStack]

Feels good knowing I'm not the only one out there that does this. Made 2021 Roth contributions for myself and wife into our respective accounts last week, but it's just sitting in MM fund as of now. Been trying to pull the trigger for a week but can't make myself do it. You all may have inspired me to put the VTSAX order in today....or not...I don't know, can't decide.

[e5116]

I actually setup an automatic investment so I'm forced to invest in the stock market at pre-determined intervals and if things drop, you can make a one time (or however many you want) acceleration of it. At least, that has worked for me psychologically, even though maybe I would have been better off doing everything Jan 1.

[EricaInvestPink]

I think it's relatively harmless personally, it's like an even more benign version of the "5% play money" principle.

Hah, I like this way of thinking about it! Makes me feel better, thanks!

[revert]

Personally I don't see any problem with this. You're contributing to your IRA every year, and you're moving that money into funds at some point within the year - you're doing extremely well, even if it isn't 100% Exactly Correct Boglehead Policy (not that there is such a thing).

You have to make some allowances for your own specific mentality, and it's not worth kicking yourself over something comparatively minor/benign when you're handling the big picture well. More concisely, don't let perfect be the enemy of good.

[Coburn]

I threw out some questions to him to help him think about how insignificant his market timing would be (thus, just invest and get it over with and get on with your life......
I'm not invited many places obviously.

Oh...such a party pooper! As you dash all the market timers (plural) hopes-n-dreams.

And the band played on...

Indeed, play on!