Should I invest it all now or a little at a time?

Question

I have a Roth IRA and I have been investing $250 a month into SVSPX which tracks the S&P 500. The expense ratio is 0.18. I was thinking about investing in ETSPX which also tracks the S&P 500 but has an expense ratio of 0.09. The only problem is this fund requires an initial deposit of $3000 (which I do have). If I go ahead and do that, then I've spent my $4000 for the year that the Roth IRA allows. Then, next year I will start the $250 per month thing (dollar cost averaging). Is this worth it or should I just continue with the SVSPX?

Just to make it clear... the $250 per month I've been adding to the index fund adds up to $3000 per year. I do invest another $1000 per year in other stocks and mutual funds. ($4000 max per year in Roth IRA)

Answer 1

I'm not anxious to put more money into stocks right now. I think the market may well go much lower. I would wait until we get another 5 or 10% pullback and then go ahead. With the market so unstable right now, I would certainly hesitate before putting in all my cash. Given the market conditions, you're probably much better off putting in your money little by little. When the Feds lower rates, it might be safer.

Answer 2

You can transfer your Roth IRA money from one account to another without affecting your annual contribution maximums. So basically, if you were going to do the transfer, you could do that and still contribute your monthly $250 into the new account as well.
As an answer to the other responses, I would say that investing in Index Funds really only guarentees you will do as well, or as bad as the Index does. Since this is your Roth IRA money, its safe to say that this is a long term, serious invesment that you are planning on using during retirement. WIth that in mind, I'd recommend you find yourself a good advisor who will help you develop a long-term plan for retirement investing. It may sound like it will cost you more, but an advisor can help you invest in some good managed funds that will participate in the bull markets, but also give you downside protection in the bear markets--which is just as important when you're talking about retirement savings.
People often say that Index funds usually do better than managed funds, and thats true, but only because there are over 1200 different fund families out there (and numerous more funds from each family) with the majority being poor managers. However, there are some excellent managed fund families that have done better than the index's over the past 20 years (even after fees are taken out).
I would recommend you take the time to discuss retirement planning with an advisor, see what they can do for you, and if they don't impress you, just continue to invest on your own. At least explore the option though.

Answer 3

Should not do either. Can't put all in 1 fund yr after yr. Need global international exposure badly. If at schwab SWINX has min of $1000 as do many others. 100 shares of EWA (Australia) would only cost around $2200 for the etf. Forget the DCA & think about where you are headed. ADX is a closed end fund selling around $14 a share that is selling at a 10%+ Discount to asset value vs at asset value like those funds. That is TRUE cheapness vs mere expenses watching. Please re-think. [e-mail] for more thought
s. 2 Russell 3000 funds in answer to other question IWV + IWW. Both etfs. TIAA-CREF the worst due to captive academic audience.

Answer 4

i'm not sure what the rules are for exchanges since that is what you are doing. But personally I don't like either choice here. a .09 difference is not much at all in the long run. Then again I don't like to follow indexes anyway but for an ira its a safe place to invest. eh...