Which is better: Monthly purchasing an ETF or first funding the account for a few months?

Asked 4 years ago

Hey! I’m pretty new to the investment game, and after researching quite a bit, I have chosen and started investing in an ETF. I’ve also budgeted one of my paycheques per month to invest into the one I’ve chosen. However, would it be better to purchase ETF stocks monthly with that amount or fund the account for a few months in a row and then make a purchase with a larger sum? My second question is: Can someone explain how to set up automatic monthly purchases? Thanks!

Buying etfs Funding brokers Lump sum investing

Andrew Moran

Friday, July 02, 2021

In the long-term, you are better off making monthly exchange-traded funds (ETFs). This strategy, known as dollar-cost averaging (DCA), allows you to buy any dips and eventually avoid volatility. 
Making lump-sum purchases will only work when there is a market collapse. For example, anyone who bought shares during the coronavirus-induced market meltdown in February and March 2020 would be sitting on a handsome windfall right about now.
For your second question, depending on your broker, you will likely need to sign a form or documents to execute these trades automatically at a specified period in the month.
But you might be better off doing it manually, so you can make purchases at the right time of the month. For example, you could buy shares of an ETF when it is deep in the red rather than when it is soaring.
The market can be an unkind mistress, so be careful with these little things!