Is it better to invest a lump sum you have just received all at once or spread it out over time?

This is a fairly complicated question, because it depends on your investing horizons and your ability to handle risk.

For example, it is May, and you receive your tax refund of $3000 from the government, have enough money invested in your cash and emergency fund accounts, and want to invest it in equity funds in your retirement account. The question becomes – should you invest it gradually over time or all at once?
For the answer to this, I defer to Jeremy Siegel in Stocks for the Long Run (my definite favorite financial book of all times). I would definitely recommend picking up a used copy of Amazon.com (see link below) if you don’t already have it.

In the book, he basically states that if you have a long-term investment plan and can tolerance a certain degree of risk, it is better to invest the lump sum all at once for several reasons.

1. Markets are efficient and it is impossible to predict consistently where the market will be tomorrow.

2. It takes the emotion out of the timing to invest.

So, invest your lump sum as soon as possible and be done with it!