Should I Spread Out My Investing?

by Galia Gichon on February 12, 2013

The past few years have created skittish investors. It’s completely understandable. I’ve heard many stories like this:

“I invested my SEP IRA at one time and the market dropped the next day.”

“I pulled out of the market too early.”
“I didn’t sell when I should have.”
Does this sound familiar? Even if you have not experienced this you might still worry about market timing.  Can you time the market?

Well… We can’t. However, there are things you can do to protect yourself from losing too much and assessing your risk.

1) If you contribute to a ROTH IRA- don’t wait until April 14 to contribute the full $5,500. Instead setup automatic monthly investing of $458.  Now you are dollar cost averaging.

2) Contributing to a SEP IRA? If so, it may be difficult to know the dollar amount for the year until you do your taxes. If you’ve been in business for a few years and are seeing less volatility, then invest a portion every month or quarter. For example, if you contributed $9,000 last year, perhaps invest $400 per month and then top it up at the end of the year. Then, you don’t run the risk of overfunding.

3) Inherited Money Or Got a Payout?
This can be especially scary when you haven’t had a great deal of savings.  I’ve worked with many clients in this situation and they are very nervous about investing the money at ONE time.  Understandable. Consider investing the money in thirds over a year. Even if you pick a high time, your next investment will be when the market is down.

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