Today let’s get practical.
If you’ve got some money set aside ready to invest – how much do you actually put in?
All of it?
Half?
A smaller “test” amount first?
Short answer: as much as you reasonably can, as soon as you reasonably can – because the biggest player in investing is time. The sooner your money is in the market, the longer it has to compound.
Longer answer: this is the lump sum versus dollar-cost averaging question.
Lump sum investing means putting the whole amount in at once.
Dollar-cost averaging means taking that same amount and breaking it into smaller purchases over time.
For example: investing $10,000 today versus investing $1,000 each month for 10 months.
For many people, the idea of putting a larger sum into the share market in one go feels uncomfortable.
What if the market drops next week?
What if next month would have been a better time to buy?
None of us can predict short-term movements. But we do have decades of data to look back on.
Vanguard analysed this exact question across multiple markets and time periods. In roughly two-thirds of scenarios, investing the full lump sum immediately resulted in a higher final value than spreading it out over a year.
Why? Because markets rise more often than they fall. If the long-term trend is upward, getting invested sooner increases your expected return.
So from a purely statistical standpoint, lump sum investing usually has the edge.
The behavioural reality
But investing is behavioural.
With regular income, you’re effectively dollar-cost averaging already – each pay is a small lump sum that you invest as it arrives. The lump sum versus DCA question mainly applies when you already have a bigger chunk sitting in cash.
And in that situation, spreading it out can sometimes feel more manageable. By phasing the money in over weeks or months, you soften the emotional impact of market volatility.
Like most aspects of investing – and medicine – it comes down to choosing the approach you can actually sustain.
A medical parallel
Think of it a bit like starting CPAP for sleep apnoea. The evidence suggests that full-night use from the beginning provides the greatest benefit. The longer the airway is supported, the better the expected outcome.
But many patients need to build up gradually – a few hours at first, then longer. That approach still moves them toward effective treatment.
What we wouldn’t recommend is leaving the sleep apnoea untreated because the mask feels uncomfortable at the start.
The benefit comes from cumulative exposure over time.
Investing works in much the same way. Being fully invested sooner is statistically optimal. Phasing it in can help build confidence. Avoiding it altogether is where the real cost lies.
The bottom line
So if you’re staring at the “Buy” button wondering what number to enter, remember:
Perfection isn’t required.
Participation is.
Whether you arrive in one transfer or several, time in the market is what does most of the heavy lifting.
Evidence-based investing is just one part of your overall financial picture.
If you’d like a structured, evidence-based approach to improving your financial wellbeing more broadly as a New Zealand doctor, you can learn more about my CPD-endorsed Financial Resuscitation course here:
👉 https://healthywealth.nz/financial-resuscitation/
This post is for general information and education only. It is not personalised financial advice and does not take into account your individual circumstances, objectives, or needs.