Lump sum vs dollar-cost averaging calculator
Investing a windfall all at once against drip-feeding it in — the cost of waiting when markets rise, and why people still wait.
Investing it all at once wins by
$4,450.19
spreading over 12 months leaves money in cash while the market compounds
- All at once
- $120,580
- Spread over 12 months
- $116,129
- Difference
- 3.83%
| Amount to invest | $60,000 |
|---|---|
| Invested per month if spread | $5,000.00 |
| Difference after 10 years | $4,450.19 |
- This assumes a steady return. Spreading out wins whenever the market falls during the spread — which is the risk it is bought to manage.
Spreading $60,000 over twelve months leaves an average of half of it in cash for a year, which at 7% costs roughly $2,000 of growth.
Side by side
How this is calculated
Both paths, month by month
The lump sum is invested on day one and compounds for the whole period. The spread version invests an equal slice each month and the uninvested remainder sits in cash earning nothing, which is where the gap comes from.
gap = FV(lump) − FV(instalments) − remaining cashA steady return is the assumption doing the work
At a constant positive return, investing sooner always wins — there is nothing to average into. Spreading only pays when the market falls during the spread, which historically happens in roughly 33% of rolling 12-month windows. That is the risk it is bought to manage, not a return strategy.
Worked example: $60,000 over ten years, spread across the first twelve months
| Amount | $60,000 |
|---|---|
| Spread | 12 months |
| Return | 7% |
| Held | 10 years |
| All at once | the larger balance |
|---|---|
| Spread out | behind by roughly $2,000 |
Historically, investing immediately beats spreading about two thirds of the time — which also means it loses one third of the time, and those are the falls people remember.
What this assumes
- The return is steady, with no falls.
- Uninvested cash earns nothing.
- No trading costs on the instalments.
- The full amount is available on day one.
Where this commonly goes wrong
- This model cannot show the case spreading exists for: a 30% fall in month three, when the instalments buy in cheaper.
- Setting the spread longer than about 24 months turns a risk-management decision into a large, permanent cash allocation.
- Waiting for "a better entry point" is not dollar-cost averaging — it is market timing with a friendlier name and no schedule.
Questions
Is it better to invest a lump sum or spread it out?
On the arithmetic, all at once, because markets rise more often than they fall and cash earns less. Historically it wins about two thirds of the time. The other third is the reason spreading exists.
How long should I spread it over?
If you spread at all, three to twelve months. Beyond about two years the money is not being averaged in, it is being held in cash, and the cost of that grows with every month.
Is dollar-cost averaging pointless then?
Not at all when it is how you invest a salary — that is the only option and it works. It is only a deliberate choice when you already hold a lump sum, and there it buys emotional insurance rather than expected return.
What if the market is at an all-time high?
Markets spend a lot of their time near all-time highs, which is what a long-term uptrend looks like. Waiting for a fall has historically cost more than the falls it avoided, because the wait is usually long.
Does this change for a big windfall?
The percentages do not, but the regret does. If getting the whole amount invested at once means you would sell after a 20% fall, spreading over six to twelve months buys a better outcome than the optimal plan you abandon.
What about inside a retirement account?
The same maths applies. The only difference is tax on the cash sitting uninvested, which is usually sheltered — so the drag of waiting is slightly smaller, not absent.
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This calculator does arithmetic on the figures you enter. It does not account for tax, fees, or your personal circumstances.
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