If you have a sum to invest, is it better to put it in at once or spread it over several months? We tested every month since 1988.
Key findings
- Investing a lump sum in the S&P 500 did better than spreading it over 12 months in 81% of the 454 periods analysed since 1988.
- On average, the lump sum ended 5.1% ahead, because the market rises in more months than it falls.
- But in the worst case, starting in June 2008, just before the 2008 crisis, it ended 28.5% behind: spreading reduces the risk of a badly timed start.
How we calculated it
For every month since 1988 we compared two ways of investing the same amount in the S&P 500 with dividends reinvested: all at once at the start, or in 12 equal parts, one at the start of each month. We compare the value after 12 months, when both strategies are fully invested: from then on they move together. We assume money waiting to be invested earns nothing; if it sat in a savings account, the lump-sum advantage would be slightly smaller.
Results
| Result | Value |
|---|---|
| Periods analysed | 454 |
| Lump sum did better | 81.1% |
| Average lump-sum advantage | +5.1% |
| Worst case (starting Jun 2008) | −28.5% |
| Best case (starting Mar 2009) | +31.0% |
The advantage by starting month
Above zero, the lump sum did better; below, spreading did. The negative areas are concentrated in starts from 2000 to 2002, in 2007 and 2008 and in 2022, just before or during the falls of those years.
What it means for you
If you already have the money and will invest it for the long term, on this data investing it all at once has done better most of the time. Spreading it out makes sense if a fall right after investing would make you sell, or if you prefer to reduce that risk in exchange for a slightly lower average return. And if you invest what you save from your salary each month, there is no decision to make: you are already spreading it. Past results do not guarantee future ones.