Front-loading TSP

[ripper]

In the past, I've usually only contributed 5% to my TSP to get the matching amount. But this year, I decided to max-out my regular and catch-up contributions, primarily due to income tax reasons.

I chose to make the bulk of my contributions as early in the year as possible. I'm currently contributing about $2,000/pay period. After about 10 pay-periods, I'll lower that to $200 so that I can still get the matching funds. I've always felt that it's best to make contributions to investments as early as possible. I always make my IRA contribution soon after Jan. 1.

But I'm not sure this is the best method, since I have no numbers to support my theory. I know dollar-cost-averaging has its advantages. But I think that maybe DCA is a more appropriate method for a buy-and-hold strategy, while I actively trade my TSP.

I'm curious to hear anyone's thoughts on which might be the better method. Or maybe there's little difference between them in the long run?

 

[Boghie]

Ripper,

Front loading is a very good strategy if you have the income to do it. Since you actively trade it means you have those contributed assets earlier. If you are more passive than it gives your assets a little more time to compound. All in all it is a good move.

As far as front loading being a good DCA strategy or not my thought is that it really goes a bit against a strict DCA. This year, however, with the early Amoeba Collapse of almost 3%, your front loading strategy enhances DCA. Maybe there is something in that kindof move...

 

[Frixxxx]

Ripper,

I agree with Boghie's information and concerns. I would say that it sounds like you are trying to "Ensure" your money is in there, rather than optimizing your position based on the market performance. But it is a deviation from the DCA model and you are using the Calendar performance measurement for reviewing your choices, rather than the traditional market performance.

I'm sure there is a back test out there to show woulda, coulda, shoulda.