Regular vs Lump Sum Investing Calculator

You have a sum of money and a decision that feels much larger than it is. Put it all in the market on Monday, or split it into monthly instalments and feed it in gradually so a bad first week does not haunt you. The usual answer is that investing at once wins on average because markets rise more often than they fall, which is true but not very useful, because it does not tell you what the choice actually costs or under what conditions the other option comes out ahead. This page answers both. The cost is the return you give up while money waits its turn, offset by the interest that money earns in the meantime, and it turns out to have an exact and rather elegant break-even. The two approaches finish level when the market returns precisely what your savings account pays over the drip window, because at that point it genuinely does not matter where the money sat. That collapses the whole decision into a single question you can actually reason about. The other half of the answer is what the drip buys you. It is not nothing: in a serious fall the difference runs to double digits as a percentage of the amount. And there is an important case where none of this applies at all, which is investing your income as it arrives, where there is no lump sum sitting anywhere and therefore no choice to make.

Calculate.co.nz is proud to be partnered with Health Based Building, a leader in sustainable and health-conscious building innovation. With over a century of experience, they develop high-performance systems like Foreverbreathe Specification, Magnum Board, and Foreverbreathe Paints to support energy-efficient, non-toxic living environments. Their commitment to healthier homes aligns with our belief that informed choices lead to better outcomes for Kiwi households.

The Break-Even Is Your Savings Rate, Exactly

This is the part worth taking away, and it is exact arithmetic rather than an approximation.

If the market returns precisely what your savings account pays over the drip window, then every dollar earns the same rate whether it is invested or waiting. The two approaches must finish identical, because there is nothing to distinguish them.

So the question is not the vague "will markets go up?" It is the much sharper "will the market beat 2.35% over the next 12 months?" Above that the lump sum wins, below it the drip does.

Worked Example: $60,000 Over 12 Months

Invest at once: $60,000.00 compounds at 7.00% for the year, finishing at $64,200.00.

Drip feed: $5,000.00 a month, with money not yet invested earning 2.35%. That finishes at $62,910.99.

The cost: $1,289.01, or 2.15% of the amount. Carried forward to a 10 year holding period the gap grows to $2,369.79, because the shortfall compounds along with everything else.

Roughly speaking the cost is half the gap between the two rates, since a dollar spends about half the window waiting its turn.

Why The Averaging Argument Is Overstated

The case for drip feeding is usually put as buying more units when prices are low, which sounds like a mechanism for producing returns. It is not.

You do buy more units at lower prices, but that is a description of what happens rather than a reason to expect a better outcome. It only helps if prices are lower during the window than at the start, which is another way of saying it helps if the market goes down.

The honest version is narrower and still worth something: the drip reduces the consequence of being unlucky with your timing, and it costs you a known amount to do so.

What It Buys In A Bad Year

The protection is real and it scales with the size of the fall.

A 20.00% fall over the window leaves the drip $5,873.12 ahead. A 30.00% fall leaves it $8,287.50 ahead, which is 13.81% of the amount. A 50.00% fall leaves it $12,550.00 ahead.

Against an expected cost of $1,289.01, that is not an unreasonable trade for someone who genuinely does not know how they would react to watching a large sum fall in its first month. Our investment time horizon risk calculator puts numbers on how likely such a year is.

Keep Any Drip Short

If you decide to spread it, the length matters more than the decision itself.

Three months costs $225.25. Twelve months costs $1,289.01. Thirty-six months costs $4,560.58, which is 7.60% of the amount for the same eventual destination.

The cost climbs steadily with the length while the reassurance mostly comes from the first few tranches. A drip measured in months is a sensible compromise. One measured in years is closer to a market timing position that has not been stated as one.

When This Question Does Not Apply

Investing your income as it arrives is not dollar cost averaging in the sense compared here, and treating it as such causes a lot of unnecessary worry.

Your KiwiSaver contributions, or a monthly direct debit from your salary, involve no lump sum sitting in cash. The money does not exist until payday, so there is no alternative to weigh the approach against. You are investing as soon as you are able, which is the only option available.

Our dollar-cost averaging calculator projects that regular-contribution case, where the useful question is how the balance builds rather than which approach wins.

The Decision Underneath

For most people the real choice is not between two good options. It is between investing and continuing to do nothing.

Seen that way, a 2.15% expected cost that actually gets the money invested is cheap. Our cash drag calculator shows what sitting in cash indefinitely costs by comparison, and it is a much larger number than anything on this page.

Pick the approach you will actually follow through on, keep the window short if you spread it, and make sure the waiting money is earning interest rather than sitting in a transaction account.

Related NZ Investing Calculators

• Dollar-Cost Averaging Calculator: projecting regular contributions over time.
• Investment Time Horizon Risk Calculator: how likely a bad year actually is.
• Cash Drag Calculator: the cost of not investing at all.
• Windfall Allocation Calculator: where a lump sum should go first.
• Savings To Investment Switch Calculator: when to move savings into the market.