Should I invest a lump sum all at once or spread it out?
Investing it at once beats averaging in about two thirds of the time, because markets rise more often than they fall — but averaging in buys something real, which is a smaller worst case.
The arithmetic is not close to controversial. Time in the market has positive Expected returnThe probability-weighted average of what could happen — not a prediction of what will. A strategy can have the higher expected return and still be the wrong choice for someone who cannot survive its bad tail., so holding cash while you drip it in has a cost, and that cost shows up in roughly two thirds of historical starting points.
The other third matters more than the average suggests, though, because it contains the cases people remember. Dollar-cost averagingInvesting a sum in instalments over time rather than at once. It lowers expected return, because cash waiting to be invested earns cash returns, and buys a smaller worst case in exchange.Read the evidence on this → over six or twelve months lowers the expected outcome and lowers the dispersion around it, and the second half of that trade is worth something to someone who would sell after a bad first month.
So the honest framing is not 'which is optimal' but 'which will you actually stick to'. A slightly worse plan you follow beats a better one you abandon in week three.
When the answer is different
- The comparison assumes the money is already yours and already earmarked for investing. Regular contributions from salary are not dollar-cost averaging in this sense — they are simply investing as the money arrives, which is unambiguously right.
- If the sum is large relative to your total assets, the behavioural argument for spreading it gets stronger, not weaker.
Put your own numbers to it
Every answer here is general. These are not.
- Lump sum vs averaging in
I have a windfall. All at once, or spread out?
- The decision simulator
How would I actually behave in a crash?
The research this rests on
Each note states its claim, rates how strong the evidence actually is, and lists the conditions under which it fails.
- Investing a windfall at once usually wins, but averaging in buys something real
Investing a lump sum immediately outperforms spreading it over subsequent months roughly two thirds of the time. (strong)
- Market timing requires being right twice, and the good days cluster in the bad times
Being out of the market for a small number of the strongest periods removes a large share of long-run returns, and those periods occur disproportionately during drawdowns. (moderate)
- Losses hurt about twice as much as equivalent gains feel good
People weight losses substantially more heavily than equal-sized gains, which systematically distorts investment decisions. (strong)
Terms used on this page
The same definitions the underlined words open, written out so nothing on this page depends on a click.
- Dollar-cost averaging
- Investing a sum in instalments over time rather than at once. It lowers expected return, because cash waiting to be invested earns cash returns, and buys a smaller worst case in exchange. Evidence →
- Expected return
- The probability-weighted average of what could happen — not a prediction of what will. A strategy can have the higher expected return and still be the wrong choice for someone who cannot survive its bad tail.