Submitted by Most_Clever_Username t3_z7on27 in personalfinance
I was just thinking I can’t wait to invest in my Roth IRA, given the market being down. That made me consider how many other people are feeling this way right now which made me think it may be an annual pattern regardless of the markets performance.
I think you're vastly over-estimating how much impact the small number of people who max their IRAs on January 1st have compared to investors overall. Consider that many, if not most IRA users do not max them on January 1st and that the people with the most to invest put way more than $6k into the stock market annually, and again, usually monthly, not all on January 1st.
I was more wondering if we will have a decent drop end of this year for loss harvesting. Seems like a lot of people have down positions, may want to sell, book the loss and reallocate
No need to wonder, it is true. Not only for loss harvesting, but also for cashing out profit for vacation or shopping, etc. if you check the volume over time for Dec, there is pattern.
However, the volume is not big enough to make any major changes, usually.
Nope. The impact of that is so small; the market would not feel the difference.
Same for people taking (selling stocks/bonds) for meet their RMD requirements; meaning prices would go down. They do not.
If you are thinking long-term and the market will go up over time, it does not matter when you invest a lump sum.
No. But I suggest you read about (controversial) "January effect" at https://www.investopedia.com/terms/j/januaryeffect.asp
I harvest losses when I have them. Why wait till the end of the year when losses you had earlier might be gone?
Yup, I do it monthly (will probably change to biweekly next year) so my budget is consistent month to month. If I invested everything on Jan 1, that means I either had $6.5k sitting in cash (not great) or I'm raiding my e-fund (not an emergency). In my case, it's double since my wife and I both max our IRAs.
I try to keep my cash amount as low as I can, so I have automatic investments to each of my accounts. I try to keep my HSA, 401k, IRA, and taxable brokerage investments consistent month to month so I don't need to think about it. If I use my e-fund, I just pause or reduce those automatic investments until it's refilled.
I find the less I think about it, the better off I am.
Of the average daily volume of stocks traded, retail investors account for around 1%. Not even a drop in the bucket. Large, institutional traders account for nearly all of trading volume.
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