What is the difference between lump-sum and dollar-cost averaging?

Lump-sum investing puts all of your money in the market on day one, so every pound is exposed to growth for the full horizon. Dollar-cost averaging (DCA) spreads the same money across many smaller instalments over several months, keeping part of it in cash until each buy date. Lump-sum usually wins when markets trend upward because it maximises time in the market, while DCA reduces the risk of buying everything just before a fall.

How does the mixed strategy work in this tool?

The mixed strategy invests a chosen share of your capital upfront as a lump sum, then drips the remainder in monthly over the same window as the DCA plan. Set the upfront share to 100% and it behaves like a pure lump sum; set it to 0% and it behaves like pure DCA. It is a practical middle ground for people who want some immediate exposure without committing everything at once.

Why do all three strategies use the same market path?

To make the comparison fair, the tool builds one deterministic series of monthly returns from your expected-return and volatility inputs, then runs all three strategies through that identical path. If each strategy used a different random path the winner would be luck, not method. Because the path is seeded from your inputs, the same scenario always reproduces the same result.

Does dollar-cost averaging actually reduce risk?

It reduces a specific risk — the timing risk of investing a large sum right before a downturn — and it smooths your entry price. The trade-off is opportunity cost: money sitting in cash is not compounding at the market rate. The tool shows this directly by reporting each strategy's worst peak-to-trough drawdown alongside its final value, so you can see the smoother-ride-versus-higher-return trade-off for your numbers.

What return and volatility figures should I use?

A broad global equity index has historically returned roughly 5 to 8 percent a year after inflation with annual volatility around 15 to 20 percent, though past performance never guarantees the future. Use conservative figures to stress-test a plan and optimistic ones to see the upside. Because the tool reports the effective CAGR for each strategy, you can sanity-check your assumptions against the headline rate you entered.

Is my data private and is this financial advice?

Every calculation runs entirely in your browser and your inputs are saved only in this device's local storage — nothing is ever uploaded. This is an educational model, not financial advice or a guarantee. It projects a single possible market path, not a distribution of outcomes, so treat the figures as an illustration of how the strategies differ rather than a forecast of your actual returns.

Investment Scenario Comparison

Compare three of the most common ways to put money to work — investing a lump sum all at once, dollar-cost averaging (DCA) the same amount in over many months, and a mixed approach that does some of each — on a single, identical market path. For any amount and horizon you get each strategy’s final value, total profit, effective annual growth rate (CAGR) and worst peak-to-trough drawdown, plotted together so the differences are obvious at a glance. It is built for anyone who has just received a windfall, a bonus, an inheritance or a pension transfer and is wrestling with the classic question: do I invest it all now, or feed it in gradually?

How it works

The tool builds one deterministic monthly return series from your two market assumptions — expected annual return and annual volatility. Each month gets a drift component (the expected return divided across the year) plus a random shock scaled by your volatility, generated from a seed derived from your inputs. Because the seed is fixed by the scenario, the path is fully reproducible: the same return, volatility and horizon always produce the same chart, and all three strategies are scored on that one shared path so the winner reflects method, not luck.

Each strategy is then simulated month by month. The lump sum is fully invested from month zero. DCA holds your capital as cash — earning the cash yield you specify — and buys an equal slice each month until the spread window closes, after which it simply rides the market. The mixed strategy invests your chosen upfront share immediately and drips the rest in over the same window. Throughout the run the tool tracks each portfolio’s total value, its worst drawdown, and the average share of capital actually exposed to the market, then reports the final values, profit, multiple and CAGR.

Example

Suppose you have £60,000 to invest over 15 years, assume a 7% return with 15% volatility, spread DCA over 24 months, and put 50% upfront in the mixed strategy. On a steadily rising path the lump sum typically ends ahead because every pound compounds for the full term, while DCA lands lower but with a noticeably smaller worst drawdown — the smoother-ride trade-off in numbers.

Strategy	Time in market	Typical outcome
Lump sum	Highest	Best final value in rising markets, deepest drawdown
DCA	Lowest early on	Lower final value, gentler drawdown, cheaper if prices dip first
Mixed	In between	A practical compromise between the two

Drop the upfront share to 0% and the mixed line tracks DCA exactly; raise it to 100% and it matches the lump sum — useful for finding a split you are comfortable holding. Every figure is calculated in your browser, and you can export the full month-by-month run to CSV.