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Old 12-13-2011, 11:54 PM
 
Location: Stephenville, Texas
600 posts, read 554,586 times
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Quote:
Originally Posted by Texas User View Post
So this means you are buying your shares on the 1st of each month? What if the market is up like 200 points that day? Why would you want to buy it that same day?
So what? It is called dollar cost averaging, and it comes out on the same day each month. (I didn't say which day because it doesn't matter) It's the same exact concept of how a 401k works. Over time, it balances out.
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Old 12-14-2011, 01:18 AM
 
12,673 posts, read 13,428,463 times
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Quote:
Originally Posted by Backintheville2 View Post
So what? It is called dollar cost averaging, and it comes out on the same day each month. (I didn't say which day because it doesn't matter) It's the same exact concept of how a 401k works. Over time, it balances out.
DCA would work the best if you buy them on a big sell off day. 401K is different because you don't control when to buy.
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Old 12-14-2011, 05:41 PM
 
Location: Billerica, MA
3,391 posts, read 4,033,237 times
Reputation: 1127
Quote:
Originally Posted by Backintheville2 View Post
So what? It is called dollar cost averaging, and it comes out on the same day each month. (I didn't say which day because it doesn't matter) It's the same exact concept of how a 401k works. Over time, it balances out.
Exactly. On short time intervals, yeah you might 'buy high'. But on the longer term, you will end up buying during some low days.

That is what I do. I put $375 per month and then add a contribution ($500) at the end of the year. That I sill simply 'add in' to mutuals when I want, aside from my automatic investments.
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Old 12-14-2011, 10:18 PM
 
12,673 posts, read 13,428,463 times
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Quote:
Originally Posted by wxjay View Post
Exactly. On short time intervals, yeah you might 'buy high'. But on the longer term, you will end up buying during some low days.

That is what I do. I put $375 per month and then add a contribution ($500) at the end of the year. That I sill simply 'add in' to mutuals when I want, aside from my automatic investments.
That is true but you want to MAXIMIZE your profit by buying on really down days. Better use of DCA.
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Old 12-15-2011, 12:27 AM
 
14,380 posts, read 12,279,113 times
Reputation: 10305
Quote:
Originally Posted by Texas User View Post
Do you all put in the $5K all at once or buy funds on the down market days?
I use Morningstar's Market Valuation Graph to determine whether I should add to my IRA:

Market Fair Value by Sector, Industry, Super-Sector, Index | Morningstar


If it gets below 90% of their estimated Fair Market Value, I start considering putting money in $50 increments in my IRA fund, Parnassus Equity Income (PRBLX); although I often wait until it's at 85% or less before I put money in. It just depends on how much cash I have on hand and how I'm feeling.

So far this year, I've put an extra $600 in my IRA. I might be making another contribution tomorrow if the market goes down again.

I can't afford to max out my IRA, unfortunately.

I also make regular contributions to my 401k plan out of my paycheck.
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Old 12-18-2011, 06:30 AM
 
894 posts, read 942,079 times
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Given the state of the country and world at this point, I would never open any sort of account with so many restrictions. This is your money, why put it in some sort of account where the government puts a bunch of rules on when you can take it out, how much you can put in, etc.?

Oh, you want tax free gains? OK, who says they are tax free? The government. Has the government ever changed their mind? There are already plenty of "We know what is better for you!" types running around DC talking about 401(K) and IRA confiscation. Their plans vary, but it pretty much comes down to you getting screwed out of your money.

The only retirement plan to invest in is a 401(k) with certain cautions. Only contribute if you get some sort of company match, and only contribute as much as needed to get the match. If the company does away with the match, you do away with your contribution. Watch out for brokerage fees and the like. What are the trading restrictions within the 401(k)? If you are in a company stock account, is the board of the company allowed to "freeze" transactions, keeping their employees from dumping stock during buyout talks and the like?

My wife had a Roth IRA and it was flat lined for over five years. I finally decided to play with some stocks and end up making her $300 within about six months (this was on only $1,500 in the account). Why folks want to tie up money is beyond me. The IRS says gains are tax free in the future, but then in the future they change their mind and your tax free gains become taxable at some level. All the while, one throws $5K a year into a Roth instead of paying down their mortgage.
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Old 12-18-2011, 01:55 PM
 
12,673 posts, read 13,428,463 times
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Roth IRA grows tax-free and withdrawal is tax free though. I would still contribute without a match.

People tie up money because they don't need it till retirement. With Roth IRA, you can actually take out your principal without a penalty.

Roth IRA has ALWAYS been tax-free.

Do you have other account that is better then a 401K and Roth IRA?



Quote:
Originally Posted by indy_317 View Post
Given the state of the country and world at this point, I would never open any sort of account with so many restrictions. This is your money, why put it in some sort of account where the government puts a bunch of rules on when you can take it out, how much you can put in, etc.?

Oh, you want tax free gains? OK, who says they are tax free? The government. Has the government ever changed their mind? There are already plenty of "We know what is better for you!" types running around DC talking about 401(K) and IRA confiscation. Their plans vary, but it pretty much comes down to you getting screwed out of your money.

The only retirement plan to invest in is a 401(k) with certain cautions. Only contribute if you get some sort of company match, and only contribute as much as needed to get the match. If the company does away with the match, you do away with your contribution. Watch out for brokerage fees and the like. What are the trading restrictions within the 401(k)? If you are in a company stock account, is the board of the company allowed to "freeze" transactions, keeping their employees from dumping stock during buyout talks and the like?

My wife had a Roth IRA and it was flat lined for over five years. I finally decided to play with some stocks and end up making her $300 within about six months (this was on only $1,500 in the account). Why folks want to tie up money is beyond me. The IRS says gains are tax free in the future, but then in the future they change their mind and your tax free gains become taxable at some level. All the while, one throws $5K a year into a Roth instead of paying down their mortgage.
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Old 12-18-2011, 02:27 PM
 
894 posts, read 942,079 times
Reputation: 549
Quote:
Originally Posted by Texas User View Post
Roth IRA has ALWAYS been tax-free.

Do you have other account that is better then a 401K and Roth IRA?
The past is the past, it is known. What isn't known is the future. 401K and IRAs are government controlled investment vehicles. They may change the rules, it is unknown.

I find it hard to believe that folks only put extra money they don't need into these vehicles. My mortgage is at 6.5%, the HELOC I paid off years ago (these were 2005 origination) was at 10%. There are tons of people who have a small credit card balance, but may be paying upwards of 10%+. Given the current state of how things are, I think a lot of folks would be better off paying down debt. Maybe there are more people totally debt free than I think, and in that case, if they want to lock up the gains/interest they earn till they are 59.5, more power to them. Thing is, everyone I talk to that have retirement accounts like 401K and IRAs are saying they are just now breaking even over a five year time frame. Now we have some talking about another recession, hundreds of thousands still without jobs, etc.. I just don't see investing in the stock market as reliable, even if one buys into the "dollar costing averaging" mutual fund sales pitch.
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Old 12-18-2011, 03:34 PM
 
12,673 posts, read 13,428,463 times
Reputation: 2520
Quote:
Originally Posted by indy_317 View Post
The past is the past, it is known. What isn't known is the future. 401K and IRAs are government controlled investment vehicles. They may change the rules, it is unknown.

I find it hard to believe that folks only put extra money they don't need into these vehicles. My mortgage is at 6.5%, the HELOC I paid off years ago (these were 2005 origination) was at 10%. There are tons of people who have a small credit card balance, but may be paying upwards of 10%+. Given the current state of how things are, I think a lot of folks would be better off paying down debt. Maybe there are more people totally debt free than I think, and in that case, if they want to lock up the gains/interest they earn till they are 59.5, more power to them. Thing is, everyone I talk to that have retirement accounts like 401K and IRAs are saying they are just now breaking even over a five year time frame. Now we have some talking about another recession, hundreds of thousands still without jobs, etc.. I just don't see investing in the stock market as reliable, even if one buys into the "dollar costing averaging" mutual fund sales pitch.
They could but so what? We can make the adjustments then. Do you have a better plan for your retirement?

Five year period is very little. From age 18 to age 59.5 is 41.5 years. Lets look at the average returns for S&P 500 during those years.

If you are going to look at the 5 year history then you should not be in the stock market.
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Old 12-18-2011, 05:42 PM
 
894 posts, read 942,079 times
Reputation: 549
Quote:
Originally Posted by Texas User View Post
Five year period is very little. From age 18 to age 59.5 is 41.5 years. Lets look at the average returns for S&P 500 during those years.

If you are going to look at the 5 year history then you should not be in the stock market.
Lets look at the national debt of the country over the last 41.5 years. Lets look at the number of federal laws on the books. Lets look at things like union laws, average wages (adjusted for inflation), cost of living, etc.. Just because the S&P 500 has historically done well doesn't mean it will always do well. Things are much more different now than they were in the past.
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