I asked a similar question last year, and got great advice. This year, there's a new wrinkle.
I previously had automatic investments set up to move a small amount of money each day from cash to a couple mutual funds. The amount that I would move each month was roughly my monthly income minus my monthly spending, so it was kind of a standard "money in, money out" thing.
A few changes this year:
- At the end of last year, I moved, and I'm spending much more on rent.
- As I get older, I'm making more money, and thus am spending a bit more
- As I get older and make more money, a higher and higher percentage of it is in my year-end bonus. For example, in 2010, my salary was 65% of my total earnings, and it's been decreasing (this year it should be under 55%).
Long story short, I no longer have "excess" money each month (I now spend more than I take in each month), and the lump sum bonus is bigger. This was a conscious decision, and while I don't like being "cash-flow negative" with respect to my salary, I know it's basically necessary unless I never increase my spending. I'm still saving over 40% of my take-home pay.
I liked the "invest it as it comes in" plan I previously had, because there was no market timing involved. But now, if I invest on a regular basis, then I'm implicitly timing the market (because I currently have all the money that I can invest this year, as opposed to the past when I would accumulate it as I'd invest it).
If I continue to invest daily (throughout the year), then I'll have a large amount of cash sitting in a savings account. I feel like I'd be implicitly timing the market (by not investing it all now, I'd be betting that the market drops). (And furthermore, this would be counter to the idea that money should be in the market as opposed to cash because on average the market will give me a higher return).
But if I invest it all now (or, say, over the next couple months), then I won't be investing anything at all from April to December, and thus will be betting that the market is at a low.
I'm not really comfortable with either option - I don't like the idea of a lot of cash just sitting there for months and months, but I also don't want to invest a lot in the first quarter of the year, but nothing for the remainder.
What's the best thing to do? Is there some reasonable compromise? Feel free to ask any relevant questions and I'll edit the question below.