Lump Sum vs Monthly Investing — Which Wins?

Why lump sum usually wins

Markets rise more often than they fall. By keeping money in cash during a 12-month PCA period, you miss out on the (average) 7% return on that cash for part of the year. Vanguard's historical analysis showed lump sum beat PCA ~2/3 of the time, with an average outperformance of ~2.3% over 10 years.

Why PCA still has a role

1. Behavioural insurance. If a 20% crash the day after you lump-sum would make you sell, PCA is better insurance against that mistake.
2. You feel better. Known advantage: regret minimisation.
3. Markets at obvious valuation extremes. If equity CAPE ratios are at 1999 / 2021 highs, slower deployment caps downside.

The hybrid approach

Many advisers suggest: lump-sum half, PCA the rest over 6-12 months. Captures most of the mathematical benefit while reducing regret risk.

What this calculator does NOT model

• Specific market timing (market could crash during PCA — see "crash scenario" output)
• Short-term volatility — real returns are not smooth
• Transaction costs on monthly purchases (immaterial on most UK platforms today)

Frequently asked questions

What if the market crashes right after I lump-sum?

It happens. The "20% crash scenario" output shows what a 20% drop would mean to each strategy. PCA wins in a sharp early-decline scenario, but only if the decline happens in your first few months.

Is PCA the same as regular monthly investing from salary?

No. Regular monthly investing is just how most people naturally invest. PCA is specifically about deploying a lump sum you already have.

How long should the PCA period be?

Vanguard data suggests shorter is better — 6 months captures most of the behavioural benefit without too much mathematical cost. Over 12 months the cost grows.