Lump sum vs drip-feeding — which wins, and how often
This is the question every inheritance, bonus and house sale produces, and the honest answer has two halves that point in opposite directions. Investing the lot immediately wins more often than not, because markets rise more often than they fall. Spreading it out reduces the chance of the one outcome people actually fear. This page quantifies both halves instead of asserting either.
The calculator
How it works
Four thousand independent market paths are generated, and on each one the same total is deployed two ways: all at once at the start, or in equal instalments over your chosen number of months with the remainder held aside meanwhile. The page reports how often the lump sum finished ahead and by how much on average. Each run is an independent draw rather than an overlapping window of one history, which matters more than it sounds: overlapping windows share most of their months and carry far less information than their count suggests.
What it assumes
The money waiting to be invested earns nothing, which understates drip-feeding — in practice it would sit in a deposit account earning something, and at high short-term rates that closes a meaningful part of the gap. Nothing is charged for the extra trades that spreading requires, which understates it again in the other direction. Both figures ignore tax entirely. Most importantly, the result is an average over thousands of paths and says nothing about your particular one.
Common questions
- If lump sum usually wins, why would anyone drip-feed?
- Because the average outcome is not the one that makes people sell. Drip-feeding is insurance against a specific and vivid scenario — putting everything in immediately before a sharp fall — and the premium is the modest average shortfall this page measures. Paying a known small cost to avoid a decision you might not stick with is a reasonable trade, and it is a behavioural argument rather than a mathematical one. The maths is not close.
- Does spreading it over longer make it safer?
- It reduces the impact of any single entry point and increases the expected shortfall, because more of your money spends more time out of a market that rises on average. Lengthen the schedule and watch both move together — the win rate for the lump sum climbs and the average gap widens. There is no length at which drip-feeding becomes the better bet on average; there are lengths at which it becomes a worse deal for the reassurance it buys.
- Why simulate rather than test it on real history?
- Because sweeping every start month of one price series produces far less evidence than the sample size implies. Overlapping windows from a single history share most of their months with their neighbours, so a couple of hundred such windows are nowhere near a couple of hundred independent observations — and every one of them describes the same single sequence of markets that happened to occur. Independent draws are a smaller claim, honestly sized.