Frequency of contributions for best return: daily? weekly? monthly? (2024)

If you're making contributions to your investments (in my case, an after-tax account), are there any recommendations on the frequency of the contributions?

For example, is it better to invest:
$200/daily
$1000/weekly ($200 * 5 days)
$2000 biweekly
$4000 monthly

Can't seem to find hard info on this...

Thanks!

I don't know. We invest bi-monthly in retirement (no choice there)), weekly in taxable and monthly in 529.

I think if you read all of the lump sum versus dollar cost averaging threads you'll see that lump summing, when you get the money, is more likely to be advantageous (time in the market vs. timing), but dollar cost averaging reduces risk of regret (slightly).

What is really important is that the money gets invested.

jastevenson wrote:If you're making contributions to your investments (in my case, an after-tax account), are there any recommendations on the frequency of the contributions?

This probably depends on A) any transaction fees associated with putting money into the investment, and B) the amount of automation in the transaction.

Long term, the market goes up.

The sooner you get in the market, the more growth you get.

David Jay wrote:Long term, the market goes up.

The sooner you get in the market, the more growth you get.

Exactly so. In this case if you save up the $4000 over a month, then on average you are holding $2000 out of the market perpetually. If the expected return in your investments is 6% you are losing $120/year for the delay. If you actually have, say, $250,000 invested that $120 loss represents a drag on your portfolio of 0.05%. If your portfolio is smaller than that the issue becomes larger in relative terms. If there is no cost to invest you can make your own decision how frequently to do it, but as a practical matter monthly would seem fine.

A question though, how do you obtain daily income to invest? Most people get paid at most on a biweekly basis and more likely monthly.

I don't think it matters, within reason.

Be careful not to start down the slope of market timing, by waiting for down days. Do something random, like the second Thursday and the second last Tuesday of each month, (or the 9th and the 22nd) and then forget about it.

Transaction costs and record keeping (paperwork) dictate that you sort of want to minimize transactions. Daily? Do you really want 200 250 transactions a year?

The similar question is often asked about rebalancing frequency. I look at that at least once a year when I am getting my tax records together. I also look when people start yelling that the sky is falling. There are many baroque schemes for rebalancing that come down to beliefs in momentum and reversion to the mean: They are market timing strategies. (I rebalance if I need to move more than about 2% of total assets around. Since we mostly own Vanguard LifeStrategy Moderate, which is a balanced fund in itself, this is not usually a big deal.)

L.

I would place these transactions on autopilot, if possible. If these additions are able to be done automatically, so much the better. Just like automating as many financial transactions as possible is a good habit to aquire, imho. You are less likely to forget, procrastinate, make up excuses for not investing, etc. I believe that frequency of contributions, assuming that contributions are ongoing, is a small issue. If you do your own accounting/tracking via Quicken/Mint/Excel spreadsheet/etc. than less transactions are easier to input, if done manually.

with kindest regards,

family_doc

Biweekly - that's when I get the paycheck.

Somewhat easy since funds are going to 457 and Roth IRA so no need to keep track of basis.

Invest whenever you have money to invest, do this automatically each pay period if at all possible.

Make investing routine. Take the decision-making, guesswork, and emotion out of the process.

"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy

As soon as you have money; investment has a positive expected value (i.e., returns > 0%).
Thus, to maximize return, invest as much as you can as soon as you can.

If you get paid every 2 weeks and want to invest some of it, you will (on average) get a better return investing it as soon as you get it, vs waiting.
(So if you have $100 to invest, you'll make more on average by putting it all in at once than by investing it over 7 days. Or than by saving the $100 you want to invest from each paycheck for 6 months, and then investing all $1200 at once. Just invest it as soon as you get it.)

Gill wrote:If you invested daily for, say, ten years you would have about 2,500 individual tax lots. Sounds like fun!
Gill

Most of the fund companies can calculate the Capital Gains for you.
You can sell whatever portion you do want, the company will calculate the Capital Gains

It is best to invest when you have the money, and set it up for automatic transactions so you don't forget.

$200/daily x5 x 52 = $52,000 ((assuming holiday transactions still occur the next business day))
$1000/weekly ($200 * 5 days) x52 = $52,000
$2000 biweekly x26 = $52,000
$4000 monthly x12 = $48,000 ((This is why biweekly mortgage payments get the loan paid off faster!))

As far as different tax lots, I let Vanguard and Fidelity's computers track that for me so it is not an issue. I agree a daily contribution seems a lot of transactions for a small amount. PIck the number and dates convenient for you.

lafder