End of year financial wrangling
I’ve read a lot of convincing literature and analysis of data that dollar-cost averaging doesn’t buy much in terms of long-term investment, so I am investing a big chunk of our non-tax-advantaged retirement funds that I had held back in the last round of purchase into the Vanguard 500 Index fund. It was one I had been looking at for a while, so when H suggested it to me, I looked into it again and found it a favorable one to put money into. Low expense ratios are great.
I’m also holding back a bit of money in case we qualify to contribute to a tax-advantaged IRA this year. In addition, I need to sell shares from my old, old dying company to take the loss. I think.
Yeah, what I’ve read is that when you apply DCA to x amount of money (if you had a lump sum, for instance) over most historical data, basically, all you do is lose out because some fraction of your money has had less time being invested. There is a small number of periods in the past where DCA won out over lump-sum investing, but those instances are far fewer than the instances where lump-sum wins over DCA.
I mean, you never know, but the various example spreadsheets and calculators convinced me.
Wish I knew what all this meant. 🙁
I’m glad you did the dollar cost averaging research for me. I’ve been debating whether to let my company take out my normal 401(k) contribution percentage from my bonus in February or not. (Letting them would mean I’d hit the pre-tax contribution limit sometime in the middle of the year.) So now all I have to think about is cash flow, not dollar cost averaging. 🙂