DCA or lump sum?

Dollar-cost averaging -- the practice of making an investment in regular intervals over an extended period of time, rather than all at once -- is a favorite recommendation of full-service brokers, an occasional subject of lively debate on the Fool's message boards, and a technique that has found some favor among Fool writers. Yet there's a growing body of academic research that claims to show that dollar-cost averaging is largely ineffective in practice, and may even be harmful to your financial well-being under some circumstances.

Last year, Texas A&M University finance professor John G. Greenhut looked at various academic studies of DCA, hoping to be able to explain why the strategy continued to be popular despite a growing body of evidence that it didn't work -- and why a few studies had, contrary to the majority of the research, found DCA to be a successful approach on occasion. His analysis is complicated (as you'll see if you click that link), but the gist of his conclusion is that lump-sum investing (abbreviated as "LS" in his article) is the better approach most of the time -- i.e., when the market is trending upward -- and that illustrations showing DCA at an advantage almost always use hypothetical stock-price patterns that don't match real trends.