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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76882  
Subject: Re: Contributions to a Roth Date: 9/11/2003 2:27 PM
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One advantage of contributing monthly is that you can "dollar cost average". You can buy a little bit (of your mutual funds or stocks or bonds or whatever) at whatever the price happens to be that month, and the price will go up and down from month to month. Some months you buy cheap, other months you pay more. But the ups and downs average out. So it's less risky than buying a whole bunch at a certain price, since the price could be high at the time you buy. Make sense?

I wouldn't dollar cost average a stock due to transaction costs. For example, $7 trades using Scottrade as a broker would cost you $84 on the year for a maximum $3000 investment if you pull it all in one stock. That's a transaction cost of 2.8% for the yearly investment.

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