Lump Sum vs Monthly Investing Calculator

Why spreading it out usually earns less

Markets rise more often than they fall. Money held back to be invested next month is, on average, missing a month of that rise while earning a deposit rate instead. Over a year of phasing in, roughly half the sum is out of the market for roughly half the period.

The historical evidence is consistent on this: investing the whole amount immediately beats phasing it in about two thirds of the time. That is not a forecast about any particular year — it is what follows from markets rising more often than not.

So why does anyone phase in?

Because the third of the time it wins is the third that hurts. Putting a large sum in a week before a sharp fall is a specific, memorable kind of regret, and someone who then sells at the bottom does far more damage than the small average cost of spreading in.

Phasing in buys protection against your own reaction. That is a real benefit and it does not show up in the arithmetic here. The question worth asking is not which produces the higher expected figure — it is whether you would stay invested through a fall in the first weeks.

The break-even fall

The calculation shows how large a market drop during the phase-in period would have to be for spreading to come out ahead. If that number is large, phasing is buying comfort at a measurable price. If it is small, the two are close enough that either is defensible.

Where phasing is not a choice

Monthly investing out of salary is not the same decision. There the money arrives over time, so there is no lump sum being held back and nothing being given up. The comparison here applies only when you already have the whole amount.

Interest while it waits

Cash held for later investment should be earning something. At current deposit rates that offsets part of the cost of waiting, which narrows the gap between the two approaches but rarely closes it, because deposit rates sit below expected equity returns for the same reason equities are riskier.