There's something uniquely American about getting a fat check and immediately feeling a twinge of anxiety about it. Money problems? Stressful. Sudden money? Sometimes even more so.
I received an email last week from a reader who'd just sold their condo and walked away with $150,000 in proceeds. Their financial advisor recommended dollar-cost averaging this windfall into ETFs at a rate of $15,000 per month. The reader wondered: smart move or missed opportunity?
It's a question I've heard countless times over my years covering personal finance. And like most good money questions, the answer isn't purely mathematical.
The conventional wisdom on Wall Street goes something like this: "Time in the market beats timing the market." But... does it always? (Spoiler: nope.)
Let's dig into this a bit. Dollar-cost averaging—investing fixed amounts at regular intervals—is essentially buying emotional insurance. You're sacrificing some expected returns to avoid the gut-wrenching experience of going all-in right before the market tanks. It's paying for peace of mind, which, let's be honest, has real value.
The data, however, tells a pretty consistent story. Lump-sum investing has historically outperformed DCA about two-thirds of the time. This makes intuitive sense—markets generally trend upward over long periods, so getting your money working sooner usually means better returns. Vanguard actually studied this extensively and found immediate investment beat DCA by an average of 2.3% over ten-month periods.
But here's where it gets interesting.
Mathematics can't measure how well you sleep at night. Or how likely you are to panic-sell during a downturn.
The reader mentioned concerns about the "political climate" affecting their decision. Now, I've covered market reactions to political events since 2008, and if there's one consistent lesson, it's that investing based on electoral politics is typically a losing strategy. Markets have performed well under presidents of both parties, and trying to sidestep volatility around elections has cost many investors dearly. Just ask the folks who went to cash before the 2016 or 2020 elections expecting disaster.
So what would I do with $150K burning a hole in my pocket right now?
Well, it depends on a few crucial factors:
First, what's your time horizon? Twenty years until you need this money? The mathematical advantage of lump-sum becomes more compelling. Five years? DCA starts looking better.
Second, consider your existing portfolio. Is this $150K essentially your life savings, or just a small addition to a substantial nest egg? The relative importance of the money dramatically affects how devastating a short-term loss would feel.
And third—be brutally honest about your own psychology. Can you handle watching $30K evaporate in a market correction without hitting the panic button?
(I once interviewed a behavioral finance expert who told me the single best predictor of investment success wasn't intelligence or financial literacy—it was emotional resilience. That stuck with me.)
Look, the reality is that financial decisions are never made in a purely rational vacuum. They're psychological. Your advisor's monthly approach isn't mathematically optimal, but it might be behaviorally optimal for you.
One middle-ground worth considering? Speed up the timeline. Maybe invest $50K now, then $25K monthly for the next four months. This gets more money working earlier while still maintaining some psychological buffer.
What fascinates me about these windfall decisions is how they reveal our relationship with uncertainty. Having interviewed dozens of financial advisors over the years, I know many suggest DCA not because it's mathematically superior (it typically isn't), but because clients who experience immediate losses often fire their advisors or make even worse decisions on their own.
In the end, the "right" approach is the one you can stick with through inevitable market turbulence. If your advisor's DCA strategy helps you sleep at night and prevents panic-selling during the next correction, then the expected return you're theoretically leaving on the table might just be money well spent.
After all, the best investment strategy isn't the one with the highest potential return—it's the one you won't abandon when things get ugly.
