Annual vs. Monthly IRA Contribution Experiment – January 2015 Update

The Annual vs. Monthly IRA Contribution Timing Experiment January 2015 Update.

Annual Contribution Roth IRA

Account Summary:

• 01/01/2015 – Contributed $5,500.00
• 01/02/2015 – Purchased mutual fund (VTIVX)

Monthly Contribution Roth IRA

Account Summary:

• 01/01/2015 – Contributed $458.33
• 01/02/2015 – Purchased mutual fund (VTIVX)

Annual vs. Monthly IRA Account Comparison

Analysis:

• The maximum of $5,500 for year 2015 was contributed into the Annual Contribution account at the beginning of January.
• Since we’re starting the second year of the experiment, we no longer have to worry about the minimum purchase/investment requirements in the Monthly Contribution account. This year, we’ll be contributing $458.33 every month, for 11 months, and $458.37 in December. If you want to make even monthly contributions to your 2015 IRA, you can do the same.
• The price of oil continued to be a huge factor in the direction of the U.S. market in January. Most of the gains from 2014 were wiped out in a single month, demonstrating that volatility in the short-term can have a huge effect on investment portfolios. The experiment is only 13 months old, so we’re not even close to the stage where we can start to reap the benefits of “buy and hold.”
• The upside is that if you’re personally implementing the monthly contribution strategy, you should be able to purchase more shares of the fund at a lower price. This lowers your average share purchase price for the long run.

IRA Contribution Timing Experiment Updates