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Hello Everyone!

I know what you're thinking --- you can't time the market. That's right of course. However, here is a question for you:

I want to invest in a target retirement fund. I'm required to make a $1,000 initial investment to open the account. I am planning to make that initial investment part of my 2012 Roth contribution. Then maximize my 2013 contribution through monthly automatic investments.

I planned to get the account started this week. However, the market is high right now. Does it make sense to wait until the market settles a bit from the Fiscal Cliff issue? When is the next tax reform meeting?

On the other hand, I could try to ignore today's high prices, get the job done and hope for the best.

I appreciate your feedback on this one.
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I don't know what broker you are going to use but couldn't you open your account, leave your initial contribution in a cash account and then make your initial investment when you think it the proper time to make it.
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If you have a number of years until retirement that this investments will hopefully making gains, I can't imagine that the difference in market level between now and a couple of months from now would make much of a difference. I think you should do it now.
But, of course, I might be wrong.

Bob
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No. of Recommendations: 6
The general rule for any retirement contribution is to make them early, often, and as large as possible.

intercst
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I'm required to make a $1,000 initial investment to open the account.

I planned to get the account started this week. However, the market is high right now. Does it make sense to wait until the market settles a bit from the Fiscal Cliff issue? When is the next tax reform meeting?


Don't rationlize a delay in opening this new retirement account. Just get it done while you're motivated. I don't understand trying to time the market on a $1,000. retirement investment. Say we get hit with a 20% market downturn next week, which would be bad timing. And, the result for you will be a loss of $200. If you try and out think this and don't open the account and set up monthly automatic contributions for 2013, it will be a bigger loss than a couple of hundred bucks.
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Don't rationalize a delay in opening this new retirement account. Just get it done while you're motivated.

With one exception - if you aren't absolutely, positively sure you qualify to contribute, I would wait until you are
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With one exception - if you aren't absolutely, positively sure you qualify to contribute, I would wait until you are

Agree, but the OP stated he wants to make this initial contribution of $1,000. into a ROTH, with the designation that it's for 2012. Then continue with funding the ROTH in 2013 with monthly contributions.

I would gather he should have a pretty good idea if he is eligible for 2012, as the year has concluded. I get you point, it's accurate, but I think it's important the OP just send the money in and get started, rather then being diverted with fiscal cliff and timing issues. At one time I thought that way myself, more concerned with market returns vs. just funding the account.
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I would gather he should have a pretty good idea if he is eligible for 2012, as the year has concluded.

Perhaps but every year there seem to be posts asking about how to undo things.

Personally, I get the tax return done before I contribute to anything and I realize that most people's situations are more stable than mine.

I also fully fill the last year I can(2012) before contributing anything for the current year (2013), including any monthly contributions that can be made before I file my taxes.
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Way back in the day when this website first started, they had an article that covered just this concept. Here is a summary.

Investor A had perfect timing and invested every year at the market bottom (the best time) and Investor B had the worst possible timing and invested every year at the market peak (the worst time). Over the next 30 years Investor A had an average return of 9% and Investor B had a return of 7% (or something like that).

While there is a difference which over time can add up to $$$, more than likely you will land in between, say 8%. Which really isn't that big a difference, statistical noise. And more importantly, not worth wasting your time and/or energy worrying about when you have more important things to do like: play catch with your son, walk on the beach with significant other, visit close friends, etc., etc., etc.

JLC
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Thank you for your valuable comments. I have been on "auto pilot" with investing for the past several years so I'm way out of practice. Don't get me wrong -- I have kept a constant flow of 15% in my 401(k) all that time. Now, however, I'm taking the time to review and make changes to my strategy.

I always like to purchase items on "sale" or use coupons when possible. That's why it's hard to spend $1,000 when the market is a little high. As many of you point out, it's not that big of a deal over the long term and nice to get the item off my check list.

Thanks for your help.
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That's why it's hard to spend $1,000 when the market is a little high.

The problem with this kind of thinking is that the market could go much higher before the next "sale" known as a correction...with the low value of that correction potentially being higher than the current value of the market. That may not seem likely, but it probably did not seem likely in 1996 when Greenspan made his irrational exuberance speech either.

Invest consistently in a well diversified portfolio.

Acme
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