When should you contribute to an IRA? Is it better to contribute on a monthly or an annual basis?
Lump sum investing (LSI) and dollar-cost averaging (DCA) is a highly visited topic. Various studies and back testing have already proven that lump sum investing will outperform dollar-cost averaging over time.
However, for most investors, a large lump sum investment is out of the question. Most of us invest periodically in one form or another. It’s more feasible for us to invest a large amount annually, or smaller amounts monthly. That’s what this experiment is all about.
The Annual vs. Monthly IRA Contribution Timing Experiment was developed to see how investment timing affects a Roth IRA, and which contribution method will give you a greater return, in the current climate of the stock market. It’s also a great way to show a typical person how easy it is to get started with retirement investing in a tax-advantaged account. With just one low-cost mutual fund, an investor can have a basic diversified portfolio that will serve their needs for a lifetime.
You can get updates on the experiment, view historical results, and learn more about the experiment on this page.
Monthly vs. Annual IRA Contribution Timing Experiment
IRA Contribution Timing Experiment Rules
Annual vs. Monthly Contribution Experiment Baseline
IRA Contribution Experiment Version 1.0
Monthly vs. Yearly IRA Contribution Timing Experiment Rules