Time to make my Roth IRA contribution for 2023

When I made my Roth IRA contribution last year for 2022 contribution year I was able to buy the stocks listed below at low prices. All of them have done well and are in the green. I have been watching the stock market climb over the past few months and fretting over making my contribution for 2023. I would much rather buy when stocks are priced low but I don’t see that happening any time soon. I currently have the following in my portfolio:

AAPL
AMD
AMZN
BAC
GOOGL
KO
TMUS

My total gain/loss is +40.83.

I am 53 so I need to maximize my returns for the next 10 to 15 years. I have considered dividing up my $7500 contribution evenly between these existing stocks but I have read up on Nvidia and even though it is very expensive it seems to be a recommended pick.

With the stock market at an all time high I really don’t know how to invest smartly right now. Any advice on making a contribution right now (this week as soon as funds settle). Thanks

Great question! And one that I am also wrestling with as I just did a rollover of funds from my 403b to an IRA, and I lost a few thousand dollars while the rollover check was in the mail instead of being invested. Now I get to decide when to pull the trigger on reinvesting the money.

I wish there was an easy answer! But the future is always full of unknowns, and so all we can do is make our best guess. There are ways of “hedging”, like dollar cost averaging in over a period of time.

The odds of the market never again seeing lower prices than today’s are pretty slight, but they are also not zero. So it’s some risk either way, whether you buy in right away or hold off.

As someone who has dabbled in the dark arts of TA, I have some ideas of chart reading and identifying potential support points, and am not in a rush to buy back in immediately, and being able to earn 5% virtually risk-free in a money market in the meantime helps. I will probably end up doing a version of dollar cost averaging, without waiting too long.

Many moons ago when I was a subscriber to the old Hidden Gems newsletter, people used to complain about the monthly HG recommendations immediately popping 10% or more within seconds of their being released, and so unless you had a highly-sophisticated computer program to immediately buy them, you had to “chase” them. I did a study, and found that a very high percentage of the time, the stocks would eventually return to the price where they were recommended. Usually it was within a week, and occasionally it would take a month or two. I don’t have access any more to see the precise numbers, but I want to say it was 80 to 90% of the time, probably closer to 90.

But trying to split hairs the way I’m doing it takes time and effort, and carries its own stress and risk. Probably best to just either dollar cost in, or just buy in right away, and be done with it. In the long run, if you’ve picked well, you should be fine. Or as I like to say, if the market tanks and you end up in the poor house, you’ll have lots of good company.

Thanks for the feedback. It’s too late to dollar cost average since I am making my contribution for 2023. The deadline is only about a month away. Looking ahead at my 2024 contribution I will definitely make regular contributions.

Hi @Emitfudd,

Welcome to the Fool.

When I used to work, I always tried to front-load.

When making IRA contributions, I accumulated cash all year then on January 1, I did my maximum contribution. If I could not come up with enough cash, I would try to top-off my contribution as quickly as possible.

On average, the “market” goes up 2 years out of 3. I will guess, my early year contributions and later, Roth conversions followed that ratio, maybe a little better.

Keep in mind that pull-backs are not on a calendar. On average, there is a correction of 10% every 10 months or so. But, we have gone a couple years without one and also had a couple in a rather short period.

Recoveries are also not set in stone.

For the 1999/2000 bubble, our portfolio was fully recovered in April 2002. We owned very little tech approaching the bubble. Coca Cola (KO) was our highest spiking stock.

For the 2007 to 2010 recession, our high was June 30, 2007.(Saturday, logged some dividends and interest) Our fully recovered date was June 25, 2010. Our first stock sale to start to replenish our expense cash cushion was Oct 2010.

For the 2020 correction, Our high was on Feb 22, 2020. Our low was Mar 18, 2020 at -34.82% in less than 4 weeks. On May 12, 2020, we set a new high, 1.21% above the Feb 22 level! We finished 2020 with a 102% gain.

So, I just do it at the first available time. (Ok, I don’t now since I don’t work and all our traditional assets are converted to Roth);

I have seen people get so wrapped-around-the-axle on the “Fear of the Pullback” that they miss great opportunities.

In 2013, a couple people on the old board system were asking if it was safe to invest after the recession. From the time one of them sold out for a 40% loss, they missed a full recoup plus a large gain, like 40% or more IIRC.

They were scared away by all the constant “Doom & Gloom” people on TV commercials and websites.

My 2 cents …

Does that help you?

Gene
All holdings and some statistics on my Fool profile page
https://discussion.fool.com/u/gdett2/activity (Click Expand)

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Turn the calendar back about 24 months and change the symbol in your search engine to TSLA

All is good until it isn’t

With your time frame I suggest putting the money in S&P500 and saving. Spend the time you save researching on a second job for a few more bucks. History and the current political enviornment suggest to me 2024 at least until Q3 should be OK. Then things will not go up – probably a dip with an extended period with no growth. A great time to invest.

Two quick things.

  1. Money markets are paying ~ 5% so there is zero reason to wait. Make your contribution and know that while you wait to decide, you are at least making a rate ABOVE the current rate of inflation.

  2. On average, the market makes multiple ATH (all-time highs) every year - except during down years so if you are dithering over not investing due to an all-time high, you are likely doomed to make a market-timing failure.

In general, you are much better off investing at or near an all-time high than at any other time.

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Make the contribution for 2023 and park it in cash until you decide what companies to invest in. But I would not fret on trying to time the market. Decide on a quality stock or ETF and get in.

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