🎁 Should I invest my windfall all at once or spread it out?

You just landed a major windfall and face a classic dilemma: invest it all today or trickle it into the market over time. Vanguard's research shows that investing a lump sum immediately wins most of the time because markets rise more often than they fall. Spreading out your investment means holding cash, which typically drags down your long-term returns.

This calculator measures the expected cost of waiting. By spreading your investments over a set period, roughly half your money sits in cash during those months. The dollar-cost averaging penalty is the difference between the market's expected growth and your cash yield over that timeframe.

We simplify the math by ignoring taxes and market volatility paths. Remember that any cash earmarked for near-term spending should stay safely in the bank regardless of your strategy.

Dollar-cost averaging does not boost your expected returns. Instead, it buys you emotional insurance against immediate regret. If investing everything today makes you lose sleep, or if an early market drop would cause you to panic and sell, averaging in is the smarter behavioral choice.

If you choose to average in, run a strict, automated plan. Set fixed dollar amounts on a fixed schedule. Vanguard notes that waiting for the perfect time to invest is just market timing in disguise.

For further related reading, check out:

• How to invest a lump sum of money | Vanguard