I haven't done a great job at managing my 401k. All of my contributions have gone into a money market (VMMXX). I'm 40 years from retirement, so I think I should take more risk and allocate a large portion to equities.

Should I wait until the market as a whole is down before doing this (i.e., buy low, sell high) or is this micro-optimizing since I have 40 years 'til retirement?

2 Answers 2


The following advice assumes that you have a significant amount already in the account in cash equivalents. If you are only talking a few hundred bucks or so, then just jump in at the next dip (like today's).

If you have a larger amount to move into equities, the safest approach is to gradually move it into investments over some period of time at regular intervals regardless of what is going on in the market. This mitigates the risk of investing it all into an fund that is peaking at the exact moment you buy.

So, for example, you might invest 20% of the total amount each month for 5 months to gradually get into the market. The larger the amount you are investing, the more you probably want to spread it out, but don't spread it out much further than a year or you are losing opportunity cost by leaving your money in cash-type investments with likely a very poor rate of return.

This strategy is called dollar-cost averaging if you want to research it more.

  • I see dollar cost averaging as an incoherent idea, let alone a "strategy".
    – Chelonian
    Aug 22, 2011 at 15:58
  • @Chelonian: Dollar-cost averaging is a good way to mitigate the risks involving timing the market. It's not incoherent at all. If you believe that you can time the market, then you should buy as much as you can as soon as you think a security is near its low point. It's just a question of whether your belief is right.
    – jprete
    Aug 22, 2011 at 18:52
  • @jprete Well, this deserves its own debate. But Moneychimp, for one, shows that dollar cost averaging (vs. a lump sum investment) loses 2 times out of 3 for the data he has. moneychimp.com/features/dollar_cost.htm
    – Chelonian
    Aug 22, 2011 at 22:06
  • Interesting link @Chelonian, thanks for posting it.
    – JohnFx
    Aug 23, 2011 at 3:17
  • buy high, sell higher Mar 27, 2018 at 15:05

My question to you would be "When is the market down?"

I know that a lot of people attempt to do this and never get close. With 40 years left to retirement, I would have you consider to just invest in the manner that you are most comfortable and let dollar cost averaging do the rest.

  • The linked article's arguments strike me as logically invalid. E.g., "DCA ensures a constant flow of new money into the retirement account. That factor alone may help you exploit current market conditions." This is a textbook example of begging the question.
    – Chelonian
    Aug 22, 2011 at 15:54

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .