CI Brightworth Private Wealth Wealth Planning

Lump sum or not: What’s the best way to invest your bonus?

Many corporate executives receive bonuses on a quarterly or annual basis. But, when should they invest these funds?

The risk of attempting to time the market is that tucking that bonus away in a savings account may mean missing out on strong returns if the market continues to grow. Fortunately, there are two investing methods to maneuver around this issue and invest that bonus or any extra cash into a long-term financial plan—lump sum investing and dollar cost averaging.

Both are sound investing approaches that require you to identify an appropriate long-term investment allocation, stick to the game plan, and avoid hindsight bias by maintaining a long-term perspective.

Lump sum investing means exactly that: taking the entire bonus and investing it all at once. On the other hand, dollar cost averaging calls for systematically investing equal dollar amounts at regular intervals. This method, usually a monthly or quarterly installment plan, allows a person to take periodic steps and may reduce the probability of extreme outcomes over time, whether positive or negative. It can bring more peace of mind to someone who has difficulty investing a large chunk of their wealth and can help investors stick to their plan, especially during volatile market periods.

To help those on the fence, here’s how both methods work: 

Lump sum investing

Investing a large sum of cash all at once is scary for some. But those who want to go this route should know that lump sum investing has proved to provide better long-term returns more times than not. A 2012 Vanguard study found that, on average, lump sum investments outperformed the dollar cost average approach across 12-month historical periods approximately two-thirds of the time. During a 36-month interval using the same rolling 10-year time frames, lump sum investments outperformed more than 90% of the time.

The reason is simple: Stock markets tend to rise over time. The S&P 500 index, for example, has risen in 31 of the past 41 years. So, putting money to work as soon as you receive it often generates higher returns than waiting. 

With this information in hand, if you are prepared to handle the possibility of a market downturn immediately after investing your bonus, lump sum investing can be a good idea. But this isn’t the answer for everyone, and none of us can predict the future. If a bear market is looming, it could take years for any near-term investment to generate any significant returns. As with nearly all investments, people need to be patient and disciplined to see a significant return.

Dollar cost averaging

This method is often a better solution for people with a lower risk appetite who are more concerned with protecting their portfolio than with the upside potential offered by a growing market over the long term. In effect, this strategy is similar to making regular contributions to a 401(k) or other retirement plan. With this systematic approach, dollar cost averaging can help investors stick to a game plan without second-guessing their decisions or getting too emotional as market conditions change.

There are other advantages, too. It enables investors to minimize the downside risk of a large, one-time investment and takes advantage of the market’s natural volatility by spreading out your entry points.

While these investors may sacrifice some growth, many prefer the dollar cost averaging approach because it may help reduce the chance of significant losses. By maintaining a consistent and disciplined strategy, the average purchase price of stocks often evens out over time due to price fluctuations. Ultimately, dollar cost averaging, with its more methodical approach, enables many people to sleep easier by mitigating both risk and stress.

The bottom line on which method to choose

Whether you choose a lump sum or dollar cost averaging approach, it’s always important to remember to maintain a long-term view. It’s a common pitfall to react to short-term volatility—and we certainly saw some people bail on their investment strategy at the wrong time during the beginning of the pandemic. Instead, sticking to a plan and consistently adding to your portfolio should work well over time, no matter which method you choose.

For more information, contact your CI Private Wealth Advisor.


Ryan Halpern, CPA, CFP®, PFS

Ryan Halpern, CPA, CFP®, PFS

Partner, Wealth Advisor

Ryan is a Certified Public Accountant, CERTIFIED FINANCIAL PLANNER™ practitioner, Personal Financial Specialist, and has earned the CFA Institute Investment Foundations™ Certificate. He received his Master of Accountancy and his Bachelor of Business Administration in accounting with honors from the University of Georgia.

Ryan joined Brightworth in 2013, and is now a partner at CI Private Wealth. Ryan started his career at Ernst & Young, concentrating on the taxation of high-net-worth individuals. He continued his career on the tax team at a multi-family office, broadening his experience with individual tax, charitable, and estate planning.

Ryan’s articles on tax and other financial strategies have been published on,, in Financial Advisor magazine, and in the Atlanta Journal-Constitution. Ryan is a member of the American Institute of Certified Public Accountants, the Georgia Society of Certified Public Accountants, and the Financial Planning Association.


This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice. This does not constitute an offer to provide any services, nor a solicitation to purchase securities. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy. This information may include opinions or forecasts, including investment strategies and economic and market conditions; however, there is no guarantee that such opinions or forecasts will prove to be correct, and they also may change without notice. We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.

Different types of investments involve degrees of risk. Future performance of any investment or wealth management strategy, including those recommended by us, may not be profitable, suitable, or prove successful. Past performance is not indicative of future results. One cannot invest directly in an index or benchmark, and those do not reflect the deduction of various fees which would diminish results. Any index or benchmark performance figures are for comparison purposes only, and client account holdings will not directly correspond to any such data.

Advisory services are offered through CI Private Wealth and its affiliates, each being a registered investment adviser (“RIA”) regulated by the US Securities and Exchange Commission (“SEC”). The advisory services are only offered in jurisdictions where the RIA is appropriately registered. The use of the term “registered” does not imply any particular level of skill or training and does not imply any approval by the SEC. For a complete discussion of the scope of advisory services offered, fees, and other disclosures, please review the RIA’s Disclosure Brochure (Form ADV Part 2A) and Form CRS, available upon request to the RIA and online at We also encourage you to review the RIA’s Privacy Policy and Code of Ethics, which are available upon request.

Our clients must, in writing, advise us of personal, financial, or investment objective changes and any restrictions desired on our services so that we may re-evaluate any previous recommendations and adjust our advisory services as needed. For current clients, please advise us immediately if you are not receiving monthly account statements from your custodian. We encourage you to compare your custodial statements to any information we provide to you.