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I was updating my tracking spreadsheet and looking at my Roth IRA (to which I have made equal monthly contributions of 1/12th of the IRS limit each month since Jan 1999 -initially because I couldn't afford lump-sum and later as momentum/DCA).

Theoretically, with a market trending upward, it makes sense to lump sum as soon as funds are available (I agree in principle if not strictly in practice). I went back and calculated my average cost per share had I invested the full IRS limit in January. Since Jan 1999, if I had lump sum invested my IRA investment for the year, my weighted average cost per share would have been 8.1% higher than is was by DCAing into the IRA. My annualized return over that same period in that account was 8.46%. I did not go back and calculate the annualized return had I paid the 8.1% more by lump sum purchasing. My annualized return in this account would have been higher if the IRS limits hadn't increased as the account is weighted towards more recent prices.

I was thinking about lumping in the full contribution limit into equities this January but after looking at my real returns vice lump-investing I think I'll keep on DCAing into this mutual fund. Note, my overall portfolio is fully invested so I do "lump" in practice... the IRA contribution is "noise" compared to my taxable and 401K savings.

Anyway, I though it was interesting and was really surprised that there would be an 8% delta... that's some real money!

Ok, Warrl, I'm ready, take your best shot.

FoolNBlue (Feeling a little smug... recognizing it's luck)
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