Ask Paul: Invest all at once or gradually? | Print |  E-mail
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QUESTION: Paul, I have some money I want to invest in a buy-and-hold account. I don’t know if I should invest it all at once or dollar-cost-average over a year or six months. Which is best?

You have asked a question which cannot be answered without knowing the future.  Stated in slightly different words, here is what you are asking: “Is right now the best time to buy, when prices are the lowest they are going to be for awhile, or will prices be lower and investments cheaper in the near future?”


Perhaps that makes it easier to see why nobody can give you the “right” answer.


If you are nervous about committing all your money at once and you think there’s a significant chance of a market downturn soon, then you might want to invest some of your money now and dollar-cost-average the rest over some period of time like the next 12 months.

If the market goes down in that period, you will be glad you kept some of your money available to invest at lower prices. But if the market goes up and up and up, you will wish you had invested everything right now.

One way to deal with this question is to think in psychological terms. Whatever you do, there’s a risk it will turn out to be the wrong thing. So what are you going to regret more, the loss of money or the loss of opportunity?


In other words, one year from now which would you rather have to explain to yourself or somebody else:

1. Why you missed out on big investment gains by keeping some of your money out of the market now
OR

2. Why you lost money because you just couldn’t wait to jump in right now


I don’t like to cast the topic of investing in a negative light. Having money available to invest is a very good thing, an opportunity to build your financial strength and your financial future. When you’re dealing with risk and trying to do the right thing, it can be easy to forget that.

My advice is to think about the questions involved here, take a deep breath and make your choice. Then don’t look back to second-guess yourself.