Like everything, there's a time to DCA and a time to lump sum. [See Ecclesiastes 3:1-15]
If trying to decide whether to lump sum or DCA, first I would say look at expected return, E(return). For bonds, E(return) is just YTM. For stocks, you have to estimate E(return), maybe from dividend yield or earnings yield (inverse of P/E10
). If expected real return meets your requirements, then lump sum in immediately. For instance, if your required real return is 2% and expected return is 2.5%, then lump sum. You've locked in your required return and you're done.
If expected return doesn't meet you requirements, you wouldn't want to lump sum in because you will be locking in at an expected return that does not meet your requirements.
For bonds, you can either wait for higher yields that meet your requirements or begin DCA'ing at the lower yields and hope that the rates rise.
For stocks look at volatility (VIX
and momentum (200-day SMA
). If volatility is high and momentum is negative, then maybe it's worth the gamble to DCA.