Dollar Cost Averaging

[Jluke]

For investing in taxable and IRA accounts (not 401k), what amount does everyone typically contribute when dollar cost averaging?

I typically establish a position with $750 to 1000 (stock or ETF), then contribute $300 to $500 when ready to add more shares. Trading fee is $5 or $7 per buy transaction.

Just curious to see what others feel is a reasonable amount when dollar cost averaging into an investment.

[disneysteve]

There's really no "right" answer to that question. It totally depends on your own personal situation and how much you have to invest.

For an IRA, if you want to put in the max of $5,500 for the year, you need to invest $458.33/month, or $541.66/month if you are 50 or older.

Other than that, it's whatever works for you.

Over the years, we've done as little as $50/month and as much as $500/month. The only totally automatic investing we do right now is $300/month into our daughter's college plan.

[disneysteve]

The only other comment I would make is that if you are buying ETFs and paying a $7 commission, you really ought to look elsewhere. There are plenty of commission-free ETFs available. No reason to spend $7 x 12 or $84/year to dollar cost average into an ETF position when you could do it for free.

[bjl584]

I DCA monthly into my ROTH and my taxable account. I have for years.

I always have maxed my ROTH, but the amount that I contribute to my taxable account have fluctuated over the years. What I have done with the contributions have also changed over time.

[corn18]

Because of how I get paid (salary + bonuses), I don't have enough left over each month to DCA into my IRA's and taxable. So, I use my bonus to lump sum into those each February when I get the bonuses. If I were to DCA into the IRA's and taxable, it would be $1,000 / mo to my wife and my IRA's and $2083 / mo into taxable.

[disneysteve]

I use my bonus to lump sum into those each February when I get the bonuses.

Even if you have to make your contributions as a lump sum, you can still dollar cost average within the account. Put your lump sum into the money market option and then each month you can transfer money into the investments of your choice.

Of course, even making a deposit only once a year still counts as DCA. It doesn't only mean monthly or quarterly.

[corn18]

Even if you have to make your contributions as a lump sum, you can still dollar cost average within the account. Put your lump sum into the money market option and then each month you can transfer money into the investments of your choice.

Of course, even making a deposit only once a year still counts as DCA. It doesn't only mean monthly or quarterly.

All the data indicate that lump sum is almost always better than DCA if you can do it.

[disneysteve]

All the data indicate that lump sum is almost always better than DCA if you can do it.

Especially if you can do it at the start of the year for that year (not for the prior year) because that way you get the benefit of tax-free growth for the maximum time period. So if you can fully fund your Roth on January 2, that's the way to go.

[autoxer]

I contribute 10% to my 401k and 10% to my taxable brokerage account every week. I'm buying mutual funds without any transaction fees. I stopped funding the ROTH early, because I'm not sure if I will be eligible.

[rennigade]

Ive always thought about fully funding roth at the beginning of the year but never have. For whatever reason in my mind if I DCA im buying the ups and downs throughout the year. Of course I dont have a crystal ball so for all I know it could go up all year...or it could go down all year.

For 401k I do $770ish per pay period...we get paid 24x a year.

For Roth I sometimes do $400/month, $500/month, or sometimes do $200 on the 1st and 15th of each month. More work for me updating checkbook when I do twice a month.

Taxable I need to start contributing at the 1st of each month. I usually throw around $250 between two accounts whenever I feel like it. I should start upping that. I have too much in my savings account.

[Nutria]

For Roth I sometimes do $400/month, $500/month, or sometimes do $200 on the 1st and 15th of each month. More work for me updating checkbook when I do twice a month.

Spreadsheets FTW!!

• More room to write comments.
• Legible!
• Searchable.
• Can "forward project" future expenditures.
• Easy to reconcile.
• One tab per month, one sheet per year.
• Can "template" your known monthly expenses.

You can do the same thing with CCs, too.

Anyway, checks are so 1995. With consumer electronic bill pay (which has actually been around for 35 years) and credit cards, we only write on average one check per month. (Our bill pay company prints and mails checks for us when needed.)

[kork13]

As stated, the best option is whatever works for you. I get paid twice monthly, so my IRA & taxable investments (along with all of my cash savings) all DCA pull out of my account on the 1st & 15th of every month. For my Roth, that means about $230 twice a month.

[dczech09]

My 401k is automatically funded every pay day (bi-weekly) with 7% of my salary. In addition, my Roth IRA is automatically funded in the amount of $458.33 on the 15th of each month (so that I hit the $5,500 max for the year).

These days, I invest $850.33 monthly for retirement. However, about 6 years when I first started investing for retirement I was only contributing $50 per month.

I recommend that people starting out invest a small amount of money (like $50) at the same time each month. As you become more comfortable, increase the contributions gradually.

Dollar-cost averaging is great, but it is important to start out small and build up gradually. This prevents people from getting uncomfortable and allows them to learn about investing while actually doing it.

How much in total a person invests every month is completely dependent on their situation. There really is no right or wrong answer. Just opinions!

[Nutria]

How much in total a person invests every month is completely dependent on their situation. There really is no right or wrong answer. Just opinions!

Grrr. There are always wrong answers. And usually right answers.

[Koolmagicguy]

I recommend that people starting out invest a small amount of money (like $50) at the same time each month. As you become more comfortable, increase the contributions gradually.

I completely agree. Took a while to bite the bullet. Over the last 2 months I've made a 7.3% return. Of course that's not locked in, and it could always go down, but it's better than putting it in a savings account.

While I agree with you that small, regular investments are best for new investors, I fully funded my Roth for tax year 2015 as a lump sum. I prefer to make it an annual event. After reading several boggleheads discussions it was clear that it does not really matter too much whether you DCA or not. Time in the market vs. timing the market, so to speak.