In 2021, I decided to max out my Roth IRA as a lump sum investment on January 1st instead of dollar cost averaging every month like I’ve done in the past. In this video, I explain the reasoning behind my decision and whether you should be doing the same.
Dollar Cost Averaging is the process of investing a fixed amount of money into the market at regular intervals, usually on a monthly basis. For eg. investing in your 401k. It reduces the emotional component of investing by taking away from market timing.
Lump sum investing is the process of investing all of the money you have in hand at once. For eg. investing a bonus from work in one go. Since you give your money more time in the market, there is potential for higher returns.
From Vanguard’s study, lump sum beats out DCA 67% of the time. This is why I decided to max out my Roth IRA on Jan 1st in order to gain exposure to the market as soon as possible. Only time will tell whether this was the right decision in the current market 🙂
Link to the Vanguard study:
– Get 2 free stocks worth upto $1600 with Webull:
✦ Get $20 with Rakuten cashback:
👉 Invest with Robinhood for a free stock:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
✅ Don’t forget to LIKE, SHARE, AND SUBSCRIBE!
📸 Follow me on Instagram!
📝 For business inquiries, contact aishandarjun@gmail.com
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
💰 RECOMMENDED CREDIT CARDS:
○ Earn $200 cash back with Chase Freedom Flex or Freedom Unlimited credit card.
○ Become a Discover Cardmember and get a $50 Statement Credit
📓 MY FAVORITE PERSONAL FINANCE/INVESTING BOOKS:
I Will Teach You to be Rich by Ramit Sethi:
Little Book of Common Sense Investing by Jack Bogle:
Rich Dad Poor Dad by Robert Kiyosaki:
The Intelligent Investor by Benjamin Graham:
The Millionaire Next Door by Thomas Stanley:
🎥 MY FILMING GEAR:
Canon EOS M50:
Rode VideoMicro:
Neewer Ring Light:
Camera Bag:
128 GB SD Card:
ABOUT ME:
I want to share stories and lessons learned while first moving to America, planning my journey to financial literacy, and adopting best practices into my life. As an international, it was difficult to find relevant resources to understand the aspects of life that were different in a new country. This channel is a comfortable space to have those discussions and help each other out!
DISCLAIMER:
The advice provided in this video is for informational/entertainment purposes only. The creators take no responsibility for any actions or decisions you may take based on the contents of the video. Please consult a professional for strategies related to your specific needs.
DISCLOSURE:
Some of the links in this description are promotional links, meaning that I may receive a small commission when you sign up for these services at NO EXTRA COST TO YOU. Thanks for supporting me 🙂
#dollarcostaveraging #lumpsuminvesting…(read more)
LEARN MORE ABOUT: IRA Accounts
TRANSFER IRA TO GOLD: Gold IRA Account
TRANSFER IRA TO SILVER: Silver IRA Account
REVEALED: Best Gold Backed IRA
Thanks for watching! Which strategy do you like better?
TIMESTAMPS:
01:17 – Dollar Cost Averaging
02:44 – Lump Sum Investing
03:49 – Which one is better?
06:01 – Does it apply to the 401k?
07:04 – What you should do
Hi Arjun, What brokerage do you use for Roth IRA? As I am on a visa, I may need to handle the account from India. As you said, the market is down by ~25%. How is your portfolio doing?
Hi @Arjun ,Had couple of questions .How to check whether an individual is eligible to contribute to Roth IRA in a simple way ? .Assuming if I earn a gross pay of 150k per year ( including bonus ,base pay ) will I be eligible to contribute 6000$ for Roth ira ? .Also how to calculate MAGI .Thanks
Good information. How do you manage to invest in stock market and save for a house down payment at the same time?
Thanks for the video. Once you maxed out your roth IRA for 2021 and you want to max out 2022. I assume you have to pile cash throughout the year until 2022 and then max it out. Does it makes sense to pile your cash in a savings account until 2022 to max it out again? Sitting in a bank account will miss pitential returns if you decide to DCA in a taxable account but instead you decide to pile it to max out your Roth IRA for next year. Unless you are lucky and receive a bonus or inheritence by the end of the year and then max out the Roth IRA in 2022. Does it makes sense to pile your cash to max out your Roth IRA assuming you will not receive a big bonus or inheritence of large amount of money instead of DCA your taxable account throughout 2021?
Hi Arjun, Can you please advice which brokerage firm is better for opening a roth ira account?
You are awesome Arjun!!!!!
I finally found a video explaining this concept correctly and clearly for once.
Thanks.
Hi Arjun! Good video. I'm glad you're talking about personal finance / investing from the lens of someone here on H1B/F1. With regards to this ROTH IRA, did you use the backdoor strategy for 2021 or did you just do the plain ROTH investment?
As usual it’s one of the great video… am in H1b investing in Roth IRA if I leave the country, do I need to close the Roth IRA account ? Also I heard after 5 years any time we can take the money out . Is this correct?
Hey great video with information. Can we on h1b start YouTube channel in USA as you did ? Response is appreciated.
Thanks Arjun. Just discovered the channel. Can you video on up coming tax season. Where to file taxes, thing to be keep in mind as H1b holder.
Hi Arjun, you guys are doing a really great job. Very helpful for Indians on work visa. Do you have any content on custodial brokerage accounts for minor kids of H1b holders? Does it complicate the tax filing? Can you please make a video on which is a better investment for kids future college or any other expenses? Can Roth IRA for kids be opened for kids as small as 3.5 yrs old? How do you open a savings account or some investment account for kids secure future?
Hi Arjun,
I would like to know if students on f1 visa open a Roth IRA account and eligible to invest in index or target date funds.
Is it legal for f1 student to do it?
Hi Arjun, great job with all the videos!
Had a question on this topic – Is ROTH IRA also a liable investing strategy for people who are married and on a nonresident alien visa in the US?
I recently came to know about this from the IRS website – "Generally, you cannot file as married filing jointly if either spouse was a nonresident alien at any time during the tax year." . This would result the tax filing to be under 'Married filing separately', for which the ROTH IRA contributions are $0.
Hey Arjun, just curious, what funds are you investing in Roth IRA?
Hi Arjun….Thanks for the video
I have a question for lump sum investing to roth IRA. If I do max contribution now and by EOY if I become ineligible to contribute to roth IRA (based on growth in earned income), what are the implications?? Will there be fine from IRS ??
Thank you Arjun! That was very helpful
Hey Arjun, quick question. Did u contribute to roth ira for the tax year 2020 or 2021?
I would argue that lump sum investing, especially for salaried employees, is lesser time in the market. Unless you chance upon the money like in your examples – inheritance/bonus.