FX Drip-Feed vs Lump Sum Calculator

Investors moving a meaningful sum offshore almost always wonder whether to convert it all at once or spread the conversion over several months. The question is worth asking and it is widely answered badly, usually by borrowing the argument for dollar cost averaging into shares, which does not transfer cleanly. This page separates the two things that actually matter. The first is that a percentage FX fee is identical whichever way you go: six conversions of ten thousand cost exactly what one conversion of sixty thousand costs, so spreading is not a way to reduce fees and anyone who tells you otherwise has not done the arithmetic. What spreading changes is the exchange rate you end up with, and whether that helps depends entirely on which way rates move afterwards. The second is the fixed fee, if your platform charges one per conversion, because that is multiplied by the number of instalments and quietly penalises spreading before any rate movement occurs. Enter a rate path, either historical if you are testing a past period or plausible if you are planning, and the calculator shows what each approach would have delivered. It will not tell you what rates are going to do, because nothing can.

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Spreading Is Not A Discount

The belief that converting in instalments reduces the cost is common and simply wrong where the fee is a percentage. Six conversions of $10,000.00 at 0.60% cost $60.00 each, totalling $360.00. One conversion of $60,000.00 at 0.60% costs $360.00. Identical.

What spreading changes is the exchange rate. That is the entire mechanism, and whether it helps depends on something nobody knows in advance.

Worked Example: $60,000 Over Six Months

The rate available on day one is 0.5850. Converting the whole amount then, after a $360.00 fee, delivers US$34,889.40.

Spreading across six instalments at 0.5850, 0.5920, 0.5780, 0.5690, 0.5810 and 0.5900 gives an average rate of 0.5825 and delivers US$34,740.30.

The lump sum won by US$149.10, which is 0.42% of the amount converted. The reason is visible in the instalment table: four of the six rates were worse than the opening rate, so waiting cost money on this particular path.

Reverse the path and the result reverses with it. This is not evidence that lump sums are better. It is evidence that this specific sequence favoured converting early.

The Argument From Shares Does Not Transfer

Spreading share purchases is usually a worse strategy than investing at once, because markets have a long-run upward expectation and time out of the market costs you return on average. That is a real effect and it is well documented.

Currencies are different. An exchange rate is a relative price between two economies. It fluctuates, sometimes violently, but it does not drift reliably upward the way an equity index does. There is no equivalent of time out of the market, because holding New Zealand dollars while you wait is not obviously worse than holding US dollars.

So the standard objection to spreading does not apply here. A currency conversion is closer to a genuine coin toss, and the honest expectation of spreading is roughly neutral rather than negative.

The Real Argument For Spreading Is Variance

If spreading does not improve the expected outcome, why do it? Because it narrows the range of outcomes.

Converting everything on one day means one rate determines the whole result. That rate might be the best of the year or the worst. Spreading across six months guarantees something close to the average, removing both tails.

For most people that is a good trade. Someone converting $60,000.00 that represents a large share of their savings is usually more troubled by the possibility of catching a bad day than they are attracted by the possibility of catching a good one. Reducing variance has genuine value even when it does not raise the expected result, and that is a far more defensible reason to spread than a claim about cost.

Watch The Fixed Fee

Where a platform charges a flat amount per conversion, spreading is penalised directly. On the worked example a $5.00 fixed fee costs $5.00 on a lump sum and $30.00 across six instalments, so spreading begins $25.00 behind. At $10.00 per conversion the handicap is $50.00.

That is small against a $60,000.00 conversion but it matters on smaller amounts, and it argues for fewer, larger instalments where such a fee exists. Check the fee schedule rather than assuming, because a fixed conversion fee is one of the less prominently disclosed charges. Our US share FX cost calculator covers the single-conversion arithmetic in more detail.

How Many Instalments Is Enough

The benefit of spreading has strong diminishing returns. Moving from one conversion to three removes most of the risk of catching a single bad day. Going from three to six removes noticeably less while tripling any fixed fee and the effort of remembering to do it.

If your reason for spreading is to avoid a bad day rather than to predict a direction, three or four instalments across a few months captures most of the benefit. Beyond that you are adding administration for a shrinking reduction in variance.

What This Cannot Do

This page evaluates a rate path you supply. Enter declining rates and spreading will look poor; enter rising rates and it will look excellent. Neither result tells you anything about the future.

The genuinely useful way to use it is to enter two or three plausible paths, including a bad one, and look at how much the decision is worth in each. If the spread between best and worst outcome is small relative to the sum involved, the decision does not warrant much agonising. If it is large, that is a reason to spread, because it is precisely the size of the risk you would be taking on a single day.

Once the money is converted, our hedged versus unhedged calculator covers the ongoing currency decision, which is a larger and longer-lasting exposure than the one-off conversion.

Related NZ Currency and Offshore Investing Calculators

• US Share FX Cost Calculator: what a single conversion costs at any fee rate.
• Hedged vs Unhedged Fund Calculator: the ongoing currency exposure after you have converted.
• FX Spread vs Fee Calculator: when the cost is hidden in the rate rather than charged as a fee.
• Repatriation Cost Calculator: the cost of bringing the money back.
• Currency Converter: a straight conversion at a given rate.