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Lump Sum Investing vs Regular Investing

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by Irish Life Financial Services

Written by Irish Life staff

Guides  •  27 March 2025  •  6 min read

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In this guide, you will learn

The difference between lump sum investing and regular investing

The meaning of dollar-cost averaging

Which investment strategy may suit you

Lump sum investing: what is it and how does it work?

In investing, a lump sum investment refers to putting in a significant chunk of money all at once rather than drip feeding over time.

For example, you might save €500 a month for investing. If you decide to keep that aside for one year before investing all €6,000 at once, that’s a lump sum investment. Other reasons for investing a larger lump sum might be receiving an inheritance or selling a house.

Lump sum investment is a strategy in contrast to regular investment – in the above scenario, you might invest your €500 each month every payday rather than waiting. In either case, you’ve invested the same amount of money, just in different ways.

Advantages of lump sum investing

If you have come into some money and plan to invest it, you might wonder whether you’re better off investing it all at once or not.

Generally, market growth looks favourably on early investment. Markets historically trend upwards over time and typically (while there are no guarantees in investing) the earlier you invest and the longer you spend invested, the better off you will be.

Investing early is key.

The moment your money is invested it has the opportunity to benefit from compound growth – one of the most powerful financial forces out there. It makes sense, then, that studies show lump sum investing can often outperform regular investing over time when the invested amounts are equal.

Generally, market growth looks favourably on early investment. The moment your money is invested it has the opportunity to benefit from compound growth.

Disadvantages of lump sum investing

As with many investment cases, lump sum investing has higher potential rewards and therefore higher potential risks.

The main disadvantage of lump sum investing is that it’s impossible to time the market. If you are unlucky enough to invest immediately before a significant downturn, then short-term market volatility can impact your growth.

On the other hand, investing regularly minimises the risk of being significantly impacted by this – though the opposite applies, too!

We’d also be remiss to not discuss the psychological impact of lump sum investing – putting everything in at once is a big deal, and fear is a paralyser. A lump sum investment could lead to regret, and an investor with cold feet may withdraw their investment too early to see the benefits.

It's also important to note that the cons of investing overall are also applicable here: you may lose some or al of your money.

When it makes sense to invest a lump sum:

You have a financial windfall: if you’ve received an inheritance, sold a property, or received a redundancy payment you don’t need for living costs, it makes more sense to invest it all at once than to use Euro-cost averaging.
You’re making a long investment: we encourage investors to invest for a minimum of five years, but if you’re looking to the super-long-term (e.g. saving for retirement in 25 years) then market volatility matters less and overall return is the thing that matters most.
You've low-interest savings: if you have savings over and above an emergency fund that are doing nothing but sitting in the bank, you’re likely better off investing them instead of leaving them vulnerable to inflation.

Is lump sum investing better than regular investing?

Well, better is slightly subjective, but the bottom line is that lump sum investing will generally outperform regular investing over time. This is of course assuming that both total investment amounts are the same, and that one is just spread over a longer period.

Which investment is right for you?

So is regular investing always worse?

Not at all.

One advantage of regular investing is enabling you to engage in a practice called dollar-cost averaging, or Euro-cost averaging in Ireland.

This involves investing the same amount of money (e.g. €500 a month) over a long period of time. While this is likely to generate less long-term profit than a lump sum investment, doing this has a few benefits:

  • Reduction of short-term risk: you won’t be investing a large amount right before a market drop.
  • Smoother volatility: investing the same amount each month means you naturally buy less when prices are high and buy more when prices are low.
  • Psychology and discipline: making investment a routine habit and not being as impacted by market swings has great psychological impacts.

Regular investing can be the best option for many people.

The psychology of lump-sum investing

Even if you’re in it for the long haul and you know intellectually that investing your entire lump sum will likely lead to better outcomes, it’s still pretty scary. After all, you can lose money investing – that’s just a fact.

Fear of investing at the wrong time could lead to “analysis paralysis” and a lack of action. Just remember that when your money isn’t invested, it’s also at risk: inflation can erode the value of your savings just as compound growth can increase it.

It’s also a known psychological phenomenon that people feel losses far more than they feel the equivalent gains. In other words, it hurts a lot more to lose €1,000 than it feels good to gain €1,000. This is also due to our expectations; we believe the market will trend upwards over time. When it dips, it feels wrong.

Investment strategy: why not both?

If you’re on the fence about whether or not to invest your lump sum or try to smooth the risk by investing over time, you can always go for the best of both worlds.

Let’s say you’re lucky enough to have €20,000 to invest. There’s nothing from stopping you investing €10,000 now and then €250 a month for the next 40 months.

This way you get the benefit of immediate compounding and time in the market from your initial investment, as well as the risk mitigation of Euro-cost averaging with regular monthly contributions.

Remember that when your money isn’t invested, it’s also at risk: inflation can erode the value of your savings just as compound growth can increase it.

Choosing between lump sum investing vs regular investment

Both lump sum investing (putting all available capital into the market at once) and regular investing (spreading your investment out over a longer period) have advantages and disadvantages.

The decision of which strategy to employ if you have a lump sum to invest depends on market conditions, risk tolerance, and your personal investment goals.

In general, if you have a lump sum then you’re likely better off investing it. In the long term, a €12,000 investment made all at once will generally outperform a €500 monthly investment made for two years.

A lump sum invested at once will generally outperform regular investing or Euro-cost averaging. However, that isn’t to say that you should save up to get a lump sum to invest – time in the market is king, and if you can only start investing small regular amounts then you should do it.

Lump sum investment works best for:

Long-term investors: if your investment goal is decades away (e.g. saving for retirement) then short-term market volatility matters less and benefitting from immediate potential growth makes the most sense.
Those with large cash sums: if you’ve received a windfall, or have savings over and above an emergency fund, it’s likely to lose value over time. When invested, it can outperform inflation.
Investors with cool heads: if the potential psychological impacts of investing your entire lump sum don’t faze you, then crack on!

Euro-cost averaging (regular investing) is better for:

People with monthly income: it’s natural for salaried employees investing from each payday to follow this model naturally, and makes much more sense than saving up to invest.
Those who are risk-averse: Euro-cost averaging smooths volatility and gives you less exposure to market downturns, but just remember that it works both ways!

Remember: time in the market is everything

Lump sum investing may be the best option for those with a lump sum but any investment beats no investment.

There is, of course, the risk that your investment can go down as well as up and you may lose money. However, there is also real risk in not investing at all.

Sitting on cash leads to inflation eroding your money away. Regardless of strategy, remember that investing is a long-term game of patience and keeping your emotions at bay.

Invest, wait, and (hopefully!) profit. That’s all there is to it.

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