tag:blogger.com,1999:blog-32639162.post116770341053729743..comments2023-12-07T01:00:56.264-05:00Comments on My Wealth Builder: Make IRA and College Fund Contributions In JanuarySuper Saverhttp://www.blogger.com/profile/11172939501208456194noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-32639162.post-25614049762077547582010-01-20T23:09:58.371-05:002010-01-20T23:09:58.371-05:00One can put make their contibution in January and ...One can put make their contibution in January and dollar cost average through the year. In a flat or bear market you win in a straight up bull you lose a bit. I will go with DCA every time.Daddy Paulhttp://www.wiser-investor.com/noreply@blogger.comtag:blogger.com,1999:blog-32639162.post-1168194985900320692007-01-07T13:36:00.000-05:002007-01-07T13:36:00.000-05:00Sun,Thanks for your comment. Your question is an ...Sun,<BR/><BR/>Thanks for your comment. Your question is an excellent one.<BR/><BR/>I agree that the common belief is that dollar-cost-averaging over a year will outperform a single purchase during the year (especially if the single purchase is at the high price of the year:-) <BR/><BR/>However, based on your question I did some additional research and found this 1993 analysis, <A HREF="http://www.fpanet.org/journal/articles/2004_Issues/jfp0604-art11.cfm" REL="nofollow">Lump Sum Beats Dollar-Cost Averaging</A>, which showed a single purchase each year was the better option for 2/3's of the time for rolling 12 month periods from 1926 through 1991. <BR/><BR/>The caveats are, of course, past performance doesn't predict future performance and the study did not include 1992 to the present.<BR/><BR/>On the other hand, dollar-cost-averaging significantly reduces the market risk versus a single purchase. This phenomena is discussed in <A HREF="http://beginnersinvest.about.com/cs/newinvestors/a/041901a.htm" REL="nofollow">Dollar Cost Averaging - A Technique that Drastically Reduces Market Risk</A>. Also, psychologically, it feels less risky to dollar-cost-average. <BR/><BR/>Hope this additional information helps.Super Saverhttps://www.blogger.com/profile/11172939501208456194noreply@blogger.comtag:blogger.com,1999:blog-32639162.post-1168139946484232282007-01-06T22:19:00.000-05:002007-01-06T22:19:00.000-05:00Though "the long term was still very good", but it...Though "the long term was still very good", but it is better than, for example, dollar-cost-averaging over the same period? For a short term like one year, the return from investing at the high can noway be better than spreading the investments over the year. Since over the long term, the market can only go up, there's no doubt that one can get good returns as long as he/she keeps investing. In my opinion, the argument from the analysis is not very strong.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-32639162.post-1167956286610361892007-01-04T19:18:00.000-05:002007-01-04T19:18:00.000-05:00Savvy Steward,Since our IRAs and CSP are long term...Savvy Steward,<BR/><BR/>Since our IRAs and CSP are long term investments, I don't worry about getting in an index mutual fund " at a high price." I once saw an analysis that showed even if one invested at the high of the S&P 500 every year, the return over the long term was still very good.Super Saverhttps://www.blogger.com/profile/11172939501208456194noreply@blogger.comtag:blogger.com,1999:blog-32639162.post-1167948221403170102007-01-04T17:03:00.000-05:002007-01-04T17:03:00.000-05:00I'm guessing for a lot of people out there they do...I'm guessing for a lot of people out there they don't have liquid cash to fully fund a IRA and a CSP in a lump sum. <BR/><BR/>Do you worry that you might buy at a high price with a lump sum instead of dollar cost averaging?Anonymousnoreply@blogger.com