I often get asked this question – should I do lump sum investing or divide my capital into smaller amounts to invest in parts over the course of time? The latter is also known as dollar-cost averaging.
Lump sum investing is great if the market is rising and you put more capital to work early. Dollar cost averaging works better in a down trending market because you buy cheaper over time.
But we will never know for sure where the market is heading so we are not going to invest based on our unreliable predictions of market directions.
The more important question here is the timing of your investment capital.
If you receive a windfall or an inheritance, lump sum investing would be a more relevant option.
However, for most people, their investment capital is derived from their salaries, which is paid monthly. You can either save the excess and invest only...