I get this question once in a while about the best way to deploy one’s investment capital into the stock market, and especially for the purpose of long term investment in an index Exchange Traded Fund like STI ETF.

Should an investor invest in one lump sum?

Or should the investor spread out the capital by investing a smaller amount on a monthly basis?

Financial advisors often touted the Dollar Cost Averaging (DCA) as a superior strategy to lump sum investment. The reason they usually give is that the same amount of capital can buy more shares or units when the prices declined. Overtime, the average purchase price would be lower.

Is this true?

This study done by Vanguard tell us that Lump Sum Investment (LSI) is better two-thirds of the time while DCA performed better merely one-third of the time.

Sparing you from reading the whole paper, the gist of it is …