Single or spread investing: what works best for you?

When you're ready to invest, one of the most important questions is: do you put the amount in all at once, or is it better to invest periodically? At Vive, we help you make the right choice depending on your goals and risk profile. In this blog, we explain the pros and cons of both options so you can make the decision that's best for you.

Should I make my investment all at once or better spread out?

We like to keep it simple at Vive, but we understand that this choice can be tricky. Investing a large amount all at once can be beneficial if you happen to enter at a low point in the market - you're buying in cheaply. But it also carries the risk that you're just entering at a peak. Spread investing, also known as dollar-cost averaging, offers a way to reduce this timing risk by spreading your investment over a longer period of time.

• Example: Suppose you have €12,000 available to invest. If you invest this entire amount at once and the market falls shortly thereafter, you suffer an immediate loss on the entire amount. If, on the other hand, you choose to invest €1,000 monthly for 12 months, you also buy in at times when the market is lower. Your average purchase price may then be lower, reducing your risk of having invested everything at a peak moment.

So with spread investing, you don't have to time the market - you automatically include both lower and higher prices, which works out for more average.

What are the risks of investing all at once?

Depositing all at once means you are fully exposed to the vagaries of the market from day one. This can lead to large profits if the market rises immediately after you enter, but also to substantial losses if the market falls. The biggest risk is that you just invest at a time when the market is at its peak, followed by a decline.

• Example: In 2008, during the financial crisis, stock prices worldwide fell by more than 40%. Investors who had invested their entire capital in one go just before that crash suffered significant losses. However, if you had spread your investment over that period, you could have bought more cheaply each time prices fell, thus lowering the average purchase price.

In short, investing all at once magnifies the impact of timing: timing well can pay big dividends, but timing wrong can be painful. You can reduce this risk by spreading out your investments.

How does diversified investing affect risks and returns?

Distributed investing reduces the impact of market fluctuations because you get in at different times. For example, you invest a portion of your money each month or quarter. This can help avoid large losses because not all of your assets are in the market at an unfavorable time.

The potential downside, though, is that if the market were to go up in one straight line, you'd miss out on some returns with staggered investing compared to fully entering right away. Still, periodic investing usually offers a more stable approach with less risk, especially for investors who find peaks and troughs difficult. You spread the risk over time.

• Example: Suppose in 2008 you had divided your €12,000 into 12 monthly deposits of €1,000. During the months of the crash, you could have invested some of your money at much lower prices. This could have made the final value of your portfolio higher than if you had invested everything just before the crash. Here, spread investing acts as a built-in safety net strategy.

What is smarter if I have a long investment horizon?

Do you have a long term in mind (say, 10 years or longer)? Historically, early and one-time entry often yields a higher end amount, because you then get maximum benefit from compound growth (the interest-on-interest effect or growth-on-growth in investments). Every day your money sits in the market, it can pay off. From that point of view, investing all at once can be advantageous if you have a large amount available right away.

On the other hand, if you have a long-term horizon but feel insecure due to short-term volatility, then staggered investing can still give you more peace of mind - even if you theoretically have slightly lower returns, you'll probably sleep better with a gradual entry.

• Example: Maria has been given €10,000 and a horizon of 20 years until her retirement. She could invest that amount in one lump sum to take full advantage of 20 years of growth. But Maria is afraid of a sudden crash. She therefore decides to deposit the €10,000 spread out over 10 months. This way, she gets into the market gradually. After 20 years, her final amount is slightly lower than if she had invested everything directly on Day 1, but she never had to worry about getting in at the wrong time.

Is it wise to invest in a mix of stocks and bonds?

In addition to the choice between in-and-out or diversified, there is also the question of what you invest in. Often a mix of stocks and bonds is wise, tailored to your risk appetite. Stocks usually offer higher returns over the long term, but go up and down. Bonds are more stable and usually provide fixed interest or smaller fluctuations. A balanced mix can ensure that you benefit from both: growth through stocks, and stability through bonds.

Vive usually recommends a personal mix based on your investment profile (internal link to profile selection). If you are young and can invest for a long time, you may want to hold more stocks (more offensive). If you are closer to your goal or retirement, you may already want to hold more bonds (more defensive) to protect your gains. The beauty of periodic investing is that with each deposit, you can also adjust your ratio as needed.

Unfortunately, there is no immediate answer

There is no one-size-fits-all answer as to whether it's better to invest all at once or spread out. It depends on your personal risk appetite, the amount of money you have available and your financial goals. Investing all at once can yield more if the timing is right, but is riskier. Spread investing provides more peace of mind and consistency, but may take a little more time for the same results.