Investing
Lump Sum vs. Dollar-Cost Averaging
Compare investing a sum all at once against spreading it out over months, and see what the waiting costs under a steady-return assumption.
What this means
If the market rose a steady 7% a year, putting all $20,000 in today would end about $343 ahead of spreading it over 12 months. Money waiting in cash at 3.5% isn't earning the market's return.
Real markets don’t rise steadily. Historically, a lump sum has often come out ahead because markets have risen more often than they’ve fallen. But if prices drop right after you invest, spreading it out would have hurt less. Dollar-cost averaging trades some expected growth for less regret and less timing risk. Neither one is a sure thing; pick the one you’ll actually stick with.
Build on it
These are estimates to help you think, not personalized legal, tax, or investment advice, and not a promise of any result.
This calculator compares two ways to invest a sum of money: all at once, or in equal slices over a number of months while the rest waits in cash. Enter the amount, how many months you'd spread it over, an assumed market return and what the waiting cash earns, and it shows what each approach is worth when the spreading ends.
Why it matters: a bonus, an inheritance or a payout raises an awkward question, which is whether to put it all in now. The math under a steady-return assumption favors going all in, because cash waiting on the sidelines isn't earning the market's return. But markets don't rise steadily, and spreading it out protects you from the regret of investing the day before a drop.
How to use it
Enter the amount and the spread
The sum you're ready to invest, and how many months you'd take to put it all in. One month is the same as all at once.
Set the two rates
An assumed yearly market return, and the yearly rate your savings or money market account pays on the money while it waits.
Read the cost of waiting
That's how much further ahead investing all at once would end up if the market rose steadily. It's the price of the protection spreading it out buys you.
Behind the numbers
Why lump sum wins on paper
If markets rise more often than they fall, money invested sooner has more time to grow. Under a steady-return assumption, every month a dollar waits in cash is a month it earns the cash rate instead of the market rate.
What dollar-cost averaging actually buys
Spreading it out lowers the chance of putting everything in at a peak. Historically, a lump sum has often come out ahead, but not always, and when it loses, it can lose sharply. DCA trades some expected growth for less regret and less timing risk.
This isn't the same as investing every payday
Putting part of each paycheck into a 401(k) is also called dollar-cost averaging, but there's no lump to decide about. You're investing money as you earn it, which is simply investing as soon as you can.
The math behind it
Lump sum: the whole amount grows at the monthly market rate for every month. Dollar-cost averaging: each month an equal slice moves from cash into the market, the invested part grows at the market rate, and the cash left waiting grows at the cash rate. Both are measured on the same date, when the last slice goes in.
Worked example
$20,000 at an assumed 7% a year, with cash earning 3.5%. All at once, it's about $21,446 after 12 months. Spread over 12 monthly slices of about $1,667, it's about $21,103. The cost of waiting is roughly $343.
Half the money, half the time
Spread over a year, on average about half your money sits out of the market for about half the year. So the cost of waiting is roughly the amount, times the gap between the market and cash rates, times half the spread in years: $20,000 x 3.5% x 0.5 is about $350.
Common questions
Which one should I choose?
Neither is a sure thing. If you'd be fine watching the full amount drop soon after investing it, a lump sum has historically had the edge more often than not. If that would make you sell or lose sleep, spreading it out over a few months is a reasonable trade.
How long should I spread it over?
The longer the spread, the more money sits in cash for longer, and the bigger the expected cost if markets rise. Many people who use DCA keep it to a year or less.
Does this calculator predict what the market will do?
No. It assumes a steady return, which real markets never deliver. It shows the cost of waiting in a rising market, not what will happen to your money.
Go deeper
The calculator gives you a number. The Investing Brick teaches you what to do with it, in plain English. And if you’re not sure where to start, the free BrickScore Assessment checks your whole foundation in about 5 minutes.
first the number, then the move