Interesting question by TS.
So buying every month is because we usually won’t have a lump sum to invest. We know the importance of setting aside a sum of money each month (whether for savings or investments) otherwise we will never be able to retire or meet our goals. Therefore unknowingly, we are all using DCA when doing our investments.
TS has asked the same question about ratio between savings and investments and his definition of both. I think the prudent answer is: it depends. The only constant is that investment is a long-term thing so you should only invest money that you won’t need for a long time, measured in decades. Speculation/trading is another story that I won’t touch on here but suffice to say that speculation money you must be prepared to lose. In terms of ratio between savings/investment, that number depends on your changing circumstances. A single person with no financial or family commitments and with a fair amount of self-discipline can set aside more for investment. However he or she will also need to consider if they want to buy a property or set money aside for wedding, so it depends on what life events one is expecting. There is no hard and fast rule for that ratio and you have to decide (prudently) for yourself.
Short answer: have an adequate rainy day fund set aside, add an additional layer of savings for life events you foresee, factor in reasonable and realistic living expenses and the rest you can chuck into the investment bucket.
And when you’ve done it right, you’ll find that you can sleep comfortably at night and when the market tanks hard, you’ll feel a slight tightening of your stomach but you remain in emotional control; in fact if you’ve been prudent, you’ll even feel a small glee at the prospect of blood on the market for some Great Singapore Sale-type cheap purchases. That’s my personal yardstick for how I know I’ve got the right mix for my own financial matters.
