A Reader in New York had a question regarding whether it is better to fully fund an investment, i.e. our IRAs, early in the year or spread out the investments over the course of the year to take advantage of dollar-cost averaging. Great question.
First, although we have fully funded our IRAs for 2011 we have not actually invested all that money. We use our IRAs for individual stock investments. We pick out stocks that we like based on our investment goals and then we try to buy same on down days via a limit order. We plan to hold these investments for at least 3-5 years or until they double in value.
Second, for our 401k contributions we contribute over the course of the full year. We do so for budgeting purposes.
Third, regarding dollar cost averaging. Our savings goals are really a savings snow-ball. I stay motivated with savings by working towards the goals and crossing them off as soon as possible. If I could fully fund our 401ks earlier in the year, I would do so.
I'm not an investment expert, but my goal is to get my/our money invested as quick as possible. Get that money working sooner rather than later. Here is an expert's opinion and explanation that sums up my feelings about this issue.
What say you? Are you pro dollar-cost averaging and if so, why?