I want to make $100 systematic monthly withdrawals from my bank checking account to a taxable mutual fund.
I currently have a $5000 balance in the mutual fund.
The investment firm's web site allows setting up the deduction on any day of the month.
Other than my checking account balance, what should I take into account when deciding on which day to withdraw?
You can look up the days the fund distributes its dividends and cap gains, and buy in after that. While it's silly to buy a fund on Monday and get a dividend on Tuesday for a $5000 purchase, for the $100, it's really a non-issue. You do need to be aware that you will need to track the purchases, 12 per year plus any dividends and cap gains that are reinvested. A spreadsheet can easily do the trick. Whatever you are investing in, you would likely benefit by diversifying at some point, maybe when the account passes $10K.
JOE
There is some evidence
This post was just BEGGING for some analysis. And since I have a lot of time on my hands, I went ahead and did it. I used Yahoo's "adjusted" data for VFINX which goes back to 3-27-87. I discovered that the 25th is actually the best day of the month to buy and the
31st is the worst. The difference is slight, only a 0.0757% difference in annualized return. But, hey, if you can get it for free, why not?I won't even begin to speculate on why this is. To do so is to try to get in to the minds of day traders and the like. Plus there's whatever effect the mind-bogglging tax code has. I also can't really say this result is statistically significant. It's just what the data dictates over the past 20 years.
--Bill
Bill Woessner wrote: "the 25th is actually the best day of the month to buy"
Now I guess that I have to check with my investment firm. I'm sure it's in the fine print somewhere! If I set up the auto withdrawal from my bank account on the 25th. Does it get invested in the mutual fund on that day?
I have no idea but I would guess the next day.
Before you go hog wild, here, I have to point out that my analysis is based on ONE fund. Granted, it's 20 years of history and a fairly diverse fund containing 500 stocks. But if the timing of dividend and capital gains distributions has anything to do with it, the optimal date will vary from fund to fund.
--Bill
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