I've been trying to get a handle on all the different investment terminology, and in the process, I've learned a new concept.
Dollar cost averaging (DCA).
When you make small, periodic investments over time, you tend to buy more shares at a lower cost.
Brilliant!
In light of this, I've changed the auto contribution for my Roth to weekly instead of monthly. At $170 per week until April 9, 2007, this should max out my $4K 2006 contribution, and also put me on track for my 2007 contributions. I'll have to calculate whether my year-to-date income savings can handle this rate of deduction, though. I'll do that this weekend.
I also feel better (somewhat) about the fact that share prices (for the Vanguard 2050 Target Retirement Fund where I've invested my Roth) have fallen in the past couple of days. Losing over $50 in the first week of starting my first investment is not exactly encouraging, although I know intellectually that it doesn't really matter.
But still, I should look into who's managing the fund, and possibly switch out. My 403(b) will be going into the same fund, and I'm thinking fund diversification is probably better.
I'm going to start building a Fund Watch list. I have over $10K in seed money that needs to go somewhere. I should be able to buy two funds with this money, although I think I'll only get one, at least until my emergency fund ($5K goal) is built up.
Oh, and FYI... I just calculated my net worth, and against my expectations, it is actually positive, even with my $22K in student loans. I'm worth nearly $5K, baby.
Rock!
Dollar cost averaging
September 8th, 2006 at 05:59 am
September 8th, 2006 at 11:27 am 1157714875
September 8th, 2006 at 12:50 pm 1157719852
Anyway, excellent work, Mimi.
September 8th, 2006 at 06:11 pm 1157739060
Broken Arrow: I just looked up the allocations for this fund. They are:
- Vanguard Total Stock Market Index Fund: 73.0%
- Vanguard European Stock Index Fund: 10.3%
- Vanguard Total Bond Market Index Fund: 9.7%
- Vanguard Pacific Stock Index Fund: 4.9%
- Vanguard Emerging Markets Stock Index Fund: 2.1%
Source: https://flagship.vanguard.com/VGApp/hnw/FundsHoldings?FundId=0699&FundIntExt=INT
~mimi
September 8th, 2006 at 07:23 pm 1157743400
September 8th, 2006 at 10:15 pm 1157753719
I've gone through one plunge and recovery with them before and I have confidence that it will recover again. Their long term rate of return has always been consistently high since we started with them.
September 8th, 2006 at 11:12 pm 1157757163
While it can be fun to look at your returns on a daily/weekly basis, it can also be disheartening. After the novelty has worn off, you might find it easier to only check on a quarterly basis.
September 8th, 2006 at 11:13 pm 1157757224
September 9th, 2006 at 03:08 am 1157771315
September 9th, 2006 at 08:22 pm 1157833334
LuckyRobin: I guess it's good that I'm not buying shares at the peak of the climb, then! I know it'll recover, I just need some patience. And faith in this brand new fund that was created mere months ago and has no performance record whatsoever.
Dido: Interesting that you bring up other investment firms. Once I'm ready to get down-and-dirty with planning my investments, I'll definitely study how Vanguard and the other company allocate their funds, and see if I can glean insights on how to custom design my own portfolio.
baselle: I wish I could take all the credit for my positive net worth, but I can't. So much of it came from my father. I think I'll do an in-depth post on this in the near future, so I have it "on record", so to speak.