Invest periodically or all at once?

Thursday, November 4th, 2004
Categorized as: Yesterday's News (old post archive)

I’m interested in putting away $20,000 for 20 to 30 years. Does it make any difference whether I put it all away at once or whether I invest say a thousand dollars a month over a 20-month period? Will my timing affect the amount I earn in the end?

Tom’s response

You have an interesting question. If we were talking about stocks, mutual funds, or fixed-rate investments like traditional bonds or bank certificates of deposit, I would encourage you to invest a little bit at a time on a scheduled basis.

This is a low-risk strategy that causes you to obtain the average cost over the period you make the investment. You do lose the chance to accidentally buy in at a cost advantage, but, more importantly, you escape the risk of buying in at a cost disadvantage.

However, Savings Bonds are different. The interest rate you receive on Savings Bonds is adjusted every six months. So you’re not locking yourself into a specific rate or – in stock market terms – a specific price.

Because Savings Bonds rates adjust, your returns get averaged out whether you invest all at once or on a scheduled basis. So the answer to your question is that with Savings Bonds, it doesn’t make any difference.

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FDIC Insured Certificates of Deposit can pay 1 or 2% more than savings bonds when held for a similar length of time. See top CD Rates Below:


On February 1st, 2006 Dan said:


All good points for the above questioner who plans to leave the I-Bonds untouched for 20-30 years.

However, if one is planning to count I-Bonds toward their “Emergency Fund”, then the one-year redemption rule clearly makes it advantageous to move gradually to I-Bonds from a more liquid source.

I’m taking a little bit at the end of each month from my online savings account into Treasury Direct. I don’t plan to redeem until it matures, but if I have to I’ll know I have access to most of it. So far, it’s proven a much better option for that universally suggested 3-6 months of living expenses than savings accounts, short-term CD’s, or T-bills!

On February 1st, 2006 Tom Adams said:

Dan – thanks for making that point. The one-year redemption rule is an angle I didn’t think of when I answered this question.

In addition, since I wrote the answer the way EE bonds work has changed and the rates on new ones don’t adjust.

And with I bonds, the fixed base-rate doesn’t adjust.

All of these are reasons to invest periodically rather than all at once.

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June 1, 2010

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Tom Adams

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