So you have money you want to invest, and you know what you want to invest it in, but are not sure when to do it. Put it all in and you might be buying cheap, or accidentally be adding at a market peak. Wait and you may miss the best (or worse) time, but you get the peace of mind that comes from an average rather than an extreme. As with many investment questions, there is no single right answer, but advantages and drawbacks (and sometimes drawdowns) to each approach. In the end, though, it comes down to psychology: which do you feel better about and if one causes you distress: is your portfolio really the ideal mix you believe it to be?

First, See for Yourself: to get a feel for how different the approaches really are (or arent), MoneyChimp offers a free tool for testing the effects of DCAing (or: periodic automatic investing) versus lump-summing based on different start and end dates and a user-specified bank account interest rate (since where one parks ones money while averaging in matters as well).

Lump Sum Investing:

• Statistically, it wins. On the whole, the DCA approach loses to lump-sum strategies. The reasoning is simple: if stocks and bonds tend to increase in value over time, then waiting at any point to invest is detrimental from a total return standpoint.
• Behaviorally, it is safe. Unless you have a plan for windfalls ahead of time, anything outside of a lump-sum approach has the potential to be influenced by feelings about the markets if you think they will go up or down in the near future, this can impact your decision and amount to accidental or subconscious market timing.
• Emotionally, it is risky. The worst-case scenario for an all-at-once investment is, of course, that it comes right before a downturn in the market (or in the case of a bond-heavy portfolio: right before an uptick in interest rates, which reduces bond fund NAV values). In turn, this can lead to regret and future self-doubt about a strategy.

Dollar Cost Averaging: 

• Traditionally, it is commonplace. Many (if not most) investors are de facto dollar cost averagers, using automated systems to contribute to 401K or IRA accounts on a regular basis. There is little reason to fight the tide on this it is at once a lump-sum strategy in the sense that you put money in as you get it, but also averages your investments in over time (a kind of default best-of-both-worlds approach. Of course, if you are employed outside the US: this works in Pounds, Euros, Yen and Yuan as well.
• Financially, its losses are minimal. Over most time periods, you might lose a little (statistics suggest you would be better off only 1/3 of the time) by dollar cost averaging, but generally you are not sacrificing a significant potential in risk-adjusted returns by waiting a short while to invest. Consider it like this: if every investment you made were delayed a full year over your lifetime, it would amount to the same thing as simply starting a year later not, on net, a giant loss unless you start or end in an outlying year.
• Conceptually, it is questionable. If you find yourself wondering too hard whether or not to dollar cost average, you might view that as a warning sign about your investment strategy and/or portfolio. After all, if you have a long enough horizon and the right asset balance, should you not feel comfortable adding more equally to all parts of your portfolio immediately versus waiting? In the case of a windfall in particular which may change your need and ability to take risk you might consider revisiting your allocation to see if these newly-added funds are sufficient to warrant reevaluating your approach.