If you have a big wad of cash to invest, you might be wondering whether to do it all right away or spread it out over time.

Regardless of what the markets are doing, you’re more likely to end up with a higher balance on the road by making a lump sum investment instead of deploying the money at set intervals (called cost spreading in dollars), a study found. of Northwestern Mutual Wealth Management Expositions.

This outperformance is true regardless of the combination of stocks and bonds you invest in.

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“If you look at the likelihood of you ending up with a higher cumulative value, the study shows that this is mostly when you use a lump sum investment. [approach] relative to the average dollar cost, ”said Matt Stucky, senior equity portfolio manager at Northwestern Mutual Wealth Management.

The study examined the 10-year rolling returns of a million dollars from 1950, comparing the results between an immediate lump sum investment and the average cost in dollars (which, in the study, assumes a million dollars is invested evenly over 12 months and then held for the remaining nine years).

Assuming a 100% equity portfolio, the lump sum return on investment exceeded the dollar cost on average 75% of the time, according to the study. For a portfolio made up of 60% equities and 40% bonds, the outperformance rate was 80%. And a 100% fixed income portfolio has outperformed the dollar cost on average 90% of the time.

The average outperformance of lump sum investments for the all-equity portfolio was 15.23%. For a 60-40 allocation it was 10.68%, and for 100% bond it was 4.3%.

Even when markets hit new highs, the data suggests that a better outcome over time always means putting your money to work at the same time, Stucky said. And, compared to lump sum investing, choosing an average dollar cost instead can feel like market timing, regardless of how the markets are performing.

“There are a lot of other times in history where the market has felt high,” Stucky said. “But market-timing is a very difficult strategy to implement successfully, whether by private investors or professional investors.”

However, he said, averaging dollar costs isn’t a bad strategy – typically 401 (k) plan account holders do it through their employee contributions throughout the year. year.

Also, before you put all your money in stocks, for example, all at once, you might want to familiarize yourself with your tolerance for risk. It is basically a combination of how well you can sleep at night during times of market volatility and how long until you need the cash. The construction of your portfolio – that is, its combination of stocks and bonds – should reflect this tolerance for risk, regardless of when you invest your money.

“From our perspective, we’re looking at 10-year time horizons in the study… and market volatility during that time will be a constant, especially with a 100% equity portfolio,” Stucky said. “It’s better if we have expectations in a strategy than to find out later that our tolerance for risk is very different.”