Lump Sum vs Drip Feed FAQs
Is it better to invest a lump sum or drip feed?
Statistically, lump sum wins about two-thirds of the time, because markets rise more often than they fall and money sitting in cash misses growth. Drip feeding wins when markets fall during the drip period · and it hugely reduces the regret of investing everything the day before a crash, which is why many people still choose it.
What is pound cost averaging?
Investing a fixed amount at regular intervals, automatically buying more units when prices are low and fewer when they are high. For monthly salary savers it happens naturally and is unambiguously good. The lump-sum debate only exists when you already hold a pile of cash · then averaging in has an expected cost.
How long should I drip feed over?
If you drip at all, 6 to 12 months is standard. Beyond a year, the drag of cash returns vs market returns compounds and the strategy increasingly resembles market timing. Keep the queued cash in the best easy-access account you can find · at 4%+ the waiting cost is much smaller than it was in the zero-rate era.
When does drip feeding genuinely make sense?
When the alternative is staying in cash forever. If crash-fear would paralyse you, a scheduled 6-12 month plan gets you invested with capped single-day regret · a behavioural win worth more than the expected cost. It can also make sense for concentrated positions, though for a diversified index fund the case is weaker.
What does this calculator assume?
Steady expected growth: the lump sum earns market returns from day one; drip-fed money earns your cash rate until each instalment goes in. Real markets are volatile, so outcomes scatter around these expected values · which is exactly why lump sum wins about two-thirds of historical periods rather than all of them.
For informational purposes only · Not investment advice · Expected values with constant growth; real returns vary and can be negative · The ~66% lump-sum win rate reflects long-run historical studies of diversified equity markets · Investments can fall as well as rise