The math favors time in the market
If returns are positive on average, money invested sooner has longer to grow, so a lump sum usually ends ahead of the same amount fed in month by month. Studies of past market data, including widely cited research by Vanguard, found lump sum investing came out ahead roughly two thirds of the time over 12-month spreading periods.
This calculator assumes a steady return, so it always shows the lump sum ahead. The gap is the cost of waiting, partly offset by the interest the uninvested cash earns while it sits on the side.
When spreading it out makes sense
The one third of cases where monthly investing wins are the times a market drop comes shortly after the start. Spreading purchases over a few months limits the regret of investing everything at a peak, and for many people that comfort is worth a small expected cost. If a big sum makes you nervous, a short schedule of three to six months is a common compromise.
For most people the question never comes up, because investing every month from each paycheck is already dollar-cost averaging by default.
Common questions
Is lump sum or dollar-cost averaging better?
On average the lump sum ends ahead because money is invested longer. Dollar-cost averaging reduces the risk of bad timing and can be easier emotionally.
How long should I spread a lump sum?
If you do spread it, 3 to 12 months is common. Longer than that tends to cost more than it saves.
What if I invest monthly from my salary?
That is regular investing, not a choice between the two. It is the right approach when the money arrives monthly.
This calculator gives estimates for planning. Real returns, rates and prices change, so treat the result as a guide rather than a promise. Read how we build and check our calculators.