2007 will be the first year that I could theoretically fully fund my Roth IRA on the first day of the year, rather than spread the investments out throughout the year. If I were to do this, it would present an increased risk into my portfolio. I want to buy when the market is lower, but there is a chance the fund of choice, the TIAA-CREF Small Cap Equity Index Fund (expense ratio of 0.30%), might go down next year, particularly if the market in general has a down year. By dollar-cost averaging over the course of the year, I’d be getting what is basically the average price during 2007. Less risk, but possibly a lower return.
It’s likely I’ll continue investing the same way I have been doing so the past few years: two automatic investments each month totaling $4,000 at the end of the year.
Updated September 1, 2011 and originally published December 21, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.