Hello, this is my first post on the board, am excited to be apart of this community.I am a 32 y/o professional and last year I decided to open up a Roth IRA and max it out at $5K. For 2013, I have not yet contributed and I have less than a week. I kept waiting for the market to drop but it never did, so now I will probably be investing at an all time high. I know, I know, I tried to "time the market".I know retirement funds are for 30 years down the line but I still feel like the market is too high. Should I invest $5K for 2013 anyways? My plan was to put in $5K every year. Doing it when the market is at an all time high makes it less appealing however. Do I just stick with the fundamentals and not worry about what the market is right now?Your advice is appreciated, thank you!
Assuming that the Roth is a self-directed account (at a brokerage somewhere), then you can go ahead and deposit the money but you don't have to "invest" it in anything yet. That is, you don't have to buy any stocks with the money that you put in to the account.
Also, the maximum contribution (assuming you're within the income limits) was increased to $5,500 in 2013, so you have an extra $500 to play with. http://www.irs.gov/Retirement-Plans/Amount-of-Roth-IRA-Contr...I would definitely make the contribution for 2013 now. What you invest it in within the account is up to you, but at least get the money into the account.dols22
I kept waiting for the market to drop but it never did, so now I will probably be investing at an all time high. I know, I know, I tried to "time the market".It's not that you "tried to time the market". It's that you made a common rookie mistake. Of investing according to your emotions. And being afraid of the market being at a recent ot alltime high.Take a look at the chart of the S&P500 http://finance.yahoo.com/q/bc?t=my&l=on&z=l&q=l&...See all those new alltime highs in 1967, 62, 66, 74 81, etc.? As you look back now, from 2014, would any of them been a bad time to invest? You've got 30 years to go. Imaging that chart with another 30 years tacked onto the righthand side. The 2014 all-time high will just be another wiggle.Picture someone just starting in 1991, just like you, who was scared of the all-time high of 400 and deciding to wait for the market to drop back down to the previous alltime high of 350. That guy is *still* waiting to get in.Don't be that guy.Plus, like the others said, you can put the money into your IRA brokerage account and just let it sit there in cash.
Most people who time the market just buy when the market is trending up, and sell when it begins to trend down. I do not know of anybody who tries to pick bottoms and/or tops, much less anybody who is successful at that.On the other hand, trend following does work if you do it right. Look at http://www.timingcube.com/app/html?page=home, for example.
Note that for regular investments like 401k contributions people do dollar cost averaging. By investing the same amount every time at regular intervals, you will acquire more shares when the market is down and fewer when the market it up. This gives you a low average cost. That should work for a Roth IRA too.That's another way of saying just keep buying and you will probably be ok.I don't put much faith in the "market wisdom" regarding over valued market and corrections. Big crashes are rare. Rumors are often started by talking heads who have nothing else to talk about or worse by big investors who are trying to talk down the market so they can buy in.Even a broken clock is right twice a day. Market wisdom has about the same value.I think the people in charge, ie the Fed, wants the recovery to continue. That means the trend lines should be headed upward. Bumps along the road will be temporary.
Do I just stick with the fundamentals and not worry about what the market is right now?Yes, absolutely.There are 3 laws of the marketplace. The first law is that no one can reliably predict what the future markets will do. If this were not so, there would be a 'market elite' that would hold virtually all of the market's wealth at the expense of those without their predictive ability. No, the 'big boys' periodically take it in the shorts just like the individual investor does...although with perhaps less frequency and less severity.So it makes no sense to try to figure out when the future 'ups' and 'downs' will occur. You've got 30 years ahead of you. Where the market is right now will make almost zero difference to the future value you'll have accumulated in 30 years. The principal factors affecting this future accumulation will be the amount you elect to save each year, your asset allocation and expenses.As an added note, and as I believe another poster mentioned, your worst enemy in achieving your future retirement savings goal is you. Emotions drive savers to do EXACTLY the OPPOSITE of what they should be doing....selling when the market has declined and buying when the market is hot. Market Timing will almmost always work against the individual. And keep in mind that adding dollars to your Roth is separate from investing the dollars in the Roth. All IRA contributions must be cash...you choose investments after the dollars are in the Roth. So if you haven't yet done it for 2013, you've got two business days.....put the dollars in and make your investment choices later.BruceM
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