Glossary
Lump-Sum Investing
Investing a large amount all at once
Lump-sum investing puts a large amount in at once, as opposed to spreading it out through dollar-cost averaging.
Statistically it wins more often. Markets rise over more periods than they fall, so investing earlier means more time in the market and more opportunity for return.
Studies find lump-sum beating phased investment roughly two-thirds of the time. In the remaining third, the market falls immediately after you commit.
The question is whether you can endure that third. A 20% decline right after investing a large sum makes sticking to the plan extremely hard. Being able to hold matters more than a statistical edge.
The compromise is phasing over a few months. Not all at once and not over years — spreading across three to six months reduces both the psychological strain and the opportunity cost. Either way, what matters is choosing and then sticking to it. Switching approaches to chase timing forfeits the advantages of both. Your own temperament, not the state of the market when the money arrives, should decide it.