Early in the calendar year, it’s a great idea to explore what it means to “front-load” your investments, and why you should do so if you can.
To front-load is to invest a lump sum of money early on, as opposed to dollar cost averaging over a longer period of time. Typically, we’re talking about investing as much as you can afford in the beginning months of the year.
If you invest early, and returns are positive for the year, your money will realize most of those gains. Periodic investments will give you lots that are only be exposed to the market for a portion of the year, and won’t see all of those gains.
Once you’ve invested that money, it can’t be spent. Paying yourself first is a tried and true budgeting strategy that guarantees you will meet your investing goals.
In other words, by front-loading, I’m putting money into the 457(b) instead of the government coffers. That’s a great way to kick the year off.
Most of the front-loading opportunities I’m discussing occur annually. You front-load early in the calendar year. This one, however, can be done at the beginning of a child’s life.