My DCA strategy - need advice

[rigz]

hello all - always got great advice here...looking for more

basically, here's whats going on. for a variety of reasons (laziness, fear of the market, lack of knowledge, whatever you want to call it) I saved all my money in the bank for many years. invested nothing.

well now I'm slowly learning and have at least started investing into the vanguard target funds. so far, not so bad. will it last? doubt it, but the past year was pretty good compared to the .2% I had been getting at the bank.

so heres my deal: I have been pouring my saved cash from the past many years into these accounts at a pretty high monthly rate once I learned about the advantages of investing for the long term (retirement at least 20 years away), however I wont be able to maintain this rate of monthly investing for much longer since I will have to back down to a normal monthly rate based on my income. (does this make sense? Hope I clarified it well enough)

so do I:

a) keep pouring the money in as fast as I can to get as much time on my side as possible (compounding interest) and then scale back in about a year or so when all those savings are gone

or

b) slow down now so that my DCA monthly contributions are more consistent over a longer period of time. I would hate to dump all my money into the market at a bad time and then realize in a few years when its a good time that my monthly contributions are much lower

hope this made sense...any help is appreciated.

(btw none of this touches my emergency fund in case that matters)

[bjl584]

Dumping a larger amount into the markets now and then backing off later probably won't matter much in the long run. The farther out you look into the future, the less you will notice the effects of what you are doing now so far as dollar cost averaging is concerned.

If you would put $100 a month into the market for 6 months, then back off to $50 a month for the next 20 years, those first 6 months' worth of investing ($600) will be nearly unnoticeable at the end of those 20 years.

[rigz]

Dumping a larger amount into the markets now and then backing off later probably won't matter much in the long run. The farther out you look into the future, the less you will notice the effects of what you are doing now so far as dollar cost averaging is concerned.

If you would put $100 a month into the market for 6 months, then back off to $50 a month for the next 20 years, those first 6 months' worth of investing ($600) will be nearly unnoticeable at the end of those 20 years.

thanks.

my monthly contributions are a bit larger than that. something like 10X per month now dropping to X per month in about 1-2 years. will that make a difference or still not significant?

[disneysteve]

Dumping a larger amount into the markets now and then backing off later probably won't matter much in the long run.

I agree. In 20 years, it won't make a difference. I'd rather see you get the money invested and working for you instead of earning nothing in your savings account.

[bjl584]

thanks.

my monthly contributions are a bit larger than that. something like 10X per month now dropping to X per month in about 1-2 years. will that make a difference or still not significant?

Probably not. All the money will end up invested anyway. The effects of DCA'ing larger amounts now won't matter decades from now.

[snafu]

I'm offering a caution as you may see some downdraft in your Mutual Fund value in the next few months if the politicians continue to disagree. That isn't a signal to withdraw funds at a loss. Most of us who left our investments alone and continued to contribute to the plan throughout the mess of 2008-2010 are back up, out of the red and well into the black overall. I still have one laggard but it is catching up s-l-o-w-l-y.

I saw those ugly years as 'on sale' getting more units per contribution. Those that withdrew having encountered losses have locked in loss and are in paltry savings that aren't even keeping up with inflation.

[silvor]

Keep what you're doing. I think stocks are on sale and will rally.

[Ramose]

I agree, it doesn't really matter.

I would hate to dump all my money into the market at a bad time and then realize in a few years when its a good time that my monthly contributions are much lower

It could be the reverse. It might be a good time to invest now and a bad time in the future.

[rigz]

thanks for all the replies!