Funding Roth

[rutgers07]

Is there a strategy to funding a Roth? If I have some extra some extra money am I just better off fully funding my Roth now or doing it as monthly contributions. Our work bonus was bigger than expected so I find myself with a little extra cash. I should say I've contributed $2300 thus far so another 3200 to go.

[Wino]

Is there a strategy to funding a Roth? If I have some extra some extra money am I just better off fully funding my Roth now or doing it as monthly contributions. Our work bonus was bigger than expected so I find myself with a little extra cash. I should say I've contributed $2300 thus far so another 3200 to go.

Since the market is still bullish, you'd probably be better off to buy now. If it were bearish, you should probably dollar-cost-average. As long as you buy the maximum every year, though, you'll do OK, no matter what the market does.

[kork13]

I disagree somewhat... I prefer to invest according to my own situation vs. what the market is doing today, so if I had a lump sum available now (as in your case), I'd invest it now. If you have a monthly amount that you can invest, DCA that amount in each month.

[disneysteve]

I disagree somewhat... I prefer to invest according to my own situation vs. what the market is doing today, so if I had a lump sum available now (as in your case), I'd invest it now. If you have a monthly amount that you can invest, DCA that amount in each month.

I agree. Don't invest based on market conditions. If you have the money, get it in there. Some years when we were able, we funded our Roths the first week of January. Why wait if you have the cash?

[MonkeyMama]

Statistically, it's better to just put it in as soon as you can. If it were me, I'd fund it. If we were talking a very large sum (six figures) it could be prudent to hedge your bets a bit. But, for $3,000 for retirement (presumably not needed for decades), I'd just throw it in the market.

[feh]

Another vote for lump sum.

[bjl584]

I dca my contributions on the first of each month automatically.

[Wino]

I have to "disagree somewhat" with those who did not understand what I wrote and then argued against their own inferences rather than my statements. I invite those of you who "disagree somewhat" to re-read my original post with the explanation below as an aid.

I stated two conditions, and the results of those conditions. The statements cannot be disputed. You can't disagree somewhat that buying lump sum with a positive trend (bull market) is the best choice. You can't disagree somewhat that buying lump sum with a negative trend (bear market) is not the best choice. That's the meaning of what I wrote, and I will be more than happy to set up a spreadsheet to show the mathematical certainty of those statements if you still want to disagree somewhat.

I also stand by my assertion that it really doesn't matter in the long run which way the OP invests, as long as he maximizes the amount - and if you re-read my post, that's exactly what I said. No one knows which way the market will go for the remainder of the year, which is all that matters for this discussion, so no one knows which strategy is best. Any suggestion offered is merely personal preference and speculation. That's why I used the word "probably" when I suggested the lump sum purchase.

I invite the OP to invest either way he feels more comfortable. Historically, the lump sum would be the best choice; however, past performance is no guarantee of future results. If the market goes on a losing streak for the next few months, then DCA would be the best choice.

Editor's note: This is what I find annoying about forum posting. People continually put meaning into the words of others that just does not exist in the words' denotations, and then they "disagree" with those interpretations. I'm fairly sure I'll be told I'm being argumentative once again for pointing out that folks are "disagreeing" with their own inferences rather than "disagreeing" with my statements, all the while, implying that my statements are faulty or incorrect.

[kork13]

Wino, I certainly didn't mean to offend somehow by disagreeing with you, but I understood exactly what you were saying. In the end, we both said to "invest your lump sum now," but we approached it from different reasoning, which is why I had to "somewhat" disagree. All I meant was that I don't let present market conditions dictate how I invest. Even though they are broad measures, "Bear" and "Bull" markets are fairly subjective in definition. It only takes a few weeks of differing market trends for the financial world's talking heads to start asking "has the [bear/bull] market ended?!?" I personally ignore the day to day & month to month fluctuations, because they're arbitrary indicators. As you said, "past performance is no guarantee of future results" -- therefore, I simply take exception to the idea of investing based on the general trend of the last few months. In the long run (40+ years), the difference in value over the timeframe of a few months will normally be negligible, so I see it as better to just invest when you have the money, regardless of the market. If you have $10k right now, invest it now. If you'll have $10k over the course of the next year, invest it as you get it.

I'm sorry if my I came off brusque, it certainly wasn't intended (though if I do somehow cause offense, you can feel free to call me out by name, it won't hurt my feelings -- snide references to me only by my quotes isn't necessary). I actually think getting a difference of opinion is what these forums are great for. Someone can ask a question and get ideas from alot of different people with sometimes very different perspectives, and they're able to make choices for themselves based on all of those opinions. I know you've been around here for a while, and I absolutely respect your opinions. But whether it's you, DisneySteve or MonkeyMama, if I don't entirely agree with something, I'll say so. It's a discussion forum -- we're going to discuss our ideas, and yes, sometimes disagree.

[sblatner]

Just because you fully fund a Roth at the beginning of the year, it doesn't mean you have to invest all at once. You could keep it in a money market and dollar cost invest over the year.

[disneysteve]

Since the market is still bullish, you'd probably be better off to buy now. If it were bearish, you should probably dollar-cost-average. As long as you buy the maximum every year, though, you'll do OK, no matter what the market does.

Correct me if I'm misreading this but to me it says if the market is going up, do the lump sum, but if the market is going down, DCA.

That's very nice except for one little detail. Nobody knows what the market is going to do. We only learn that in hindsight. Since none of us have a crystal ball, I suggest not trying to time the market. Put the money into the tax shelter as soon as you can. It gets you that tax-free growth earlier and it also prevents you from "accidentally" spending the money elsewhere.

[Wino]

Correct me if I'm misreading this but to me it says if the market is going up, do the lump sum, but if the market is going down, DCA.

You are misreading it. Never do I indicate a preferred course of action for the OP. I'll parse the offending paragraph more precisely:

"Since the market is bullish..." This clause acknowledges that the present trend is upward.
"...you'd probably be better off to buy now." This clause says that buying immediately in an upward trending market will get you the most shares for your money. The word "probably" is what acknowledges that no one knows if the bullish trend will continue.

"If it were bearish..." This clause introduces the alternative scenario, a downward trend.
"...you should probably dollar-cost-average." This clause says that buying over time in a downward trending market will get you the most shares for your money. Again, the word "probably" acknowledges the uncertainty of the future.

In neither of the two above cases is any suggestion made. It merely states why one might want to do one option or the other. The original question was "Is there a strategy to funding a Roth..." if one has a lump sum. That's what my statements addressed. Had the OP asked what someone would do if he had a lump sum, I would have said, "I'd fund it all in now."

...snide references to me only by my quotes isn't necessary

My reference was emphatic*, but not derogatory, which is a requirement to be "snide." If the opportunity presents itself, as you request, I will address you directly in the future.

* From dictionary.com for emphasis: "stress laid on particular words, by means of position,repetition, or other indication."

[kork13]

Sorry, it may just be my perspective, but to me that only sounds like "It's okay to time the market *this time*, just not all the time, which doesn't make sense IMO.

For the record: I think we're splitting hairs and getting our hackles up over nothing. I think I'll be stepping away now before tempers flare any further...

[Wino]

I think I'll be stepping away now before tempers flare any further...

I am sorry that correcting your incorrect inference caused your temper to flare. I truly tried to be as gentle as I could in my correction of your misreading of my statement.

[Petunia 100]

I am sorry that correcting your incorrect inference caused your temper to flare. I truly tried to be as gentle as I could in my correction of your misreading of my statement.

For goodness' sake. You stated Rutgers should do a lump sum "since the market is still bullish". This is known as market timing. No inference is required.

As usual, the temper which is flaring is yours.