How often should I invest?

By Kurt Walkom

It's a simple optimisation of five factors! (and we've made a calculator to do it)

If you’re asking this question, good on you.

You either are, or are on your way to being, in the top 20% of investors worldwide.

Big call, right?

It’s actually not as big as it seems. Here’s why.

By asking ‘how often’ you’re positioning yourself to be a long-term, passive investor – consciously or subconsciously.

And as you’ve probably heard before, long-term passive investors consistently outperform those who actively manage their investments. This is true for professionals too, and in case you are wondering, things certainly haven’t changed for the better during coronavirus.

In fact, long-term passive investors who invest in low-cost broad-based ETFs have, on average, outperformed more than 80% of professionally-managed active funds over a 15-year period globally (one of many benefits of a SimpliFI'ed investment strategy).

So, “How often should I invest?” is a great question! 🎉

And the answer is surprisingly simple.

How often you should invest is just an optimisation of the following five factors:

  1. How often you save (e.g. your pay cycle)
  2. The amount you save each time
  3. The interest rate you earn on your savings
  4. The return you expect to earn on your investments
  5. The amount it costs you to make a new investment

And if you know these things already, lucky you! We’ve built an optimal investing frequency calculator to do the maths for you - check it out.

But if you want more of an explanation, and especially if you are new to investing, do yourself a favour and keep reading.

We’ll cover the importance of getting started, the best strategy for everyday investors, how much to invest, how to invest a lump sum, and how our investing frequency calculator works.

Let's dig in to the nitty-gritty information that you should know before deciding how often you should invest, specifically:

Before worrying about ‘how often’ - start!

I’ve spoken to a lot of experienced investors over the past 2 years.

I’ve surveyed even more.

The one thing that comes up again and again?

Everyone wishes they’d started earlier.

For example, we asked the audience of the Sydney Premiere of the Playing With FIRE documentary “What would your one tip be if you were to start your FI journey today?”

And here’s the slide from the night...

What would your one tip be if you were to start your FI journey today?

Image from PWF sydney - read about the event

So, if you’re reading this and have your basic finances in order, just start.

Start small. Stay skeptical. Stop stalling.

I am yet to talk to a single experienced investor who would dissuade someone from starting to invest because they haven’t optimised their international vs domestic allocation, they chose LICs over ETFs, or they didn’t fully understand Franking Credits yet.

And the reason is that we all have immense respect for the power of compound interest.

The power of compounding means that starting just one year earlier is likely to be far more beneficial than any optimisation you make midway through your journey.

For example, take a look at this quick comparison of two people who both invest $100 a month at a 5% annual compound rate of return until age 65, with one who starts at 25 while the other begins at 35.

Graph comparing saving at 25 vs 35 from saving $100 per month at a 5% annual compound interest rate

An extra 10 years of investing results in a balance that is nearly double, while only contributing $12,000 more… 🤯

A close friend of mine once said ‘investing early is like starting a marathon that others haven't yet decided to race’.

Brilliant, don’t you think?

It’s so true because it doesn’t matter how you start, if you start early enough, you’ll finish way ahead of the pack.

If you haven’t started, start today. 🏁🏃‍♀️🏃‍♂️

⇑ Back to Top

Dollar-cost Averaging: the best investing strategy for everyday investors

Consistent incremental investments is the best way for everyday investors to invest.

End of story.

Why so?

By investing a set dollar amount every month/quarter/year, you buy more shares when the market is low and less when the market is high.

This results in a lower average cost of your investments which means you get above-market returns without trying to time the market.

And there are very few people who can do that consistently.

Below is an illustration of how this works using a $417/month (!) investment.    

Illustration of dollar cost averaging with $417 monthly

This strategy is known as dollar-cost averaging (DCA) and it can be broadly applied to any single asset or portfolio of assets with sufficient liquidity.

This makes investing in a portfolio of shares, particularly ETFs and/or LICs, a perfect fit.

To be clear - DCA is not definitively better than lump sum investing (we'll get to that later), but if trying to choose between DCA and timing the market, DCA wins every time.

DCA also has massive mental benefits.

It completely eliminates the need to time the market. Or even bother watching it.

So you can say goodbye to that stress and hello to heaps more time to do the things you love.

I like to think of investing with a DCA strategy like planting a tree.

You make the decision to plant the seed, which takes effort. You need to figure out what type you want, then go to the store, purchase the seed and plant it.

But after that you water it every so often without really thinking.

It doesn’t seem like much at the start, but over time it grows. And it keeps growing.

10 years later, your tree has grown large and strong and doesn’t need watering anymore.

You get to sit down and lean against its trunk whenever you want and enjoy the shade.

And it doesn’t matter how much time you spent watching it during its growth – it’ll still be the same size.

Just don’t forget to water it 😉🌱

⇑ Back to Top 

How much to start investing with 

The exact mathematical answer here is incorrect.

Because what’s more important than how much you invest at the start is that you’re able to keep investing as you go.

Just like watering a seed. 🚿

So image that your first, second and third investments temporarily halve in value.

What’s the amount that you would feel comfortable having already invested to invest that fourth time, and over what timeframe?

Let’s say it’s $15,000. And that you’ve invested it in three 6-month intervals.

24 months after you made your first investment, the $15,000 you’ve invested is worth $7,500 on paper.

While you know that this is only temporary (because you’re a long-term investor), you feel stressed – it’s human nature.

Would you be able to invest another $5,000?

Your answer to this question will depend on your own personal circumstances – previous investing experience, personal wealth, risk tolerance etc. Because this is such a huge topic, we’ve tackled it separately.

If your answer is no, then you either need to increase the length of time between each investment (e.g. yearly instead of half yearly) or reduce the amount you invest each time (e.g. $2,500 instead of $5,000).

If your answer is yes then you’re good to go. You might even want to consider increasing the amount or reducing the time frame.

As your confidence grows, you will be able to invest more, more frequently, and your investing journey will start to snowball from there.

Ultimately, your goal should be to get your investing frequency to align with your pay cycle because that will allow you to ‘pay yourself first’ directly into your investments.

But that won’t be achievable for everyone and that’s not a problem either.

You’ll be laughing either way. ☺🏖

⇑ Back to Top

How to invest a lump sum

Alright, we've covered the best approach for incremental investing. But what if you win the lottery, get an early inheritance or someother windfall?

Well, research from Vanguard shows that, statistically, investing a lump sum today is 66% more likely to outperform a DCA strategy where you break it up into 12 chunks to invest each month.

Essentially, they discovered that, on average, the return benefits of 'being in the market for longer' outweigh the benefits of 'buying more at low prices & less at high prices' two thirds of the time. 

Specifically, the outperformance was 2.39% for the US, 2.03% for the UK & 1.45% for AU.

But, while I'm a big fan of Vanguard, I think they've missed the mark this time.

Reason being, they didn't extend their research to cover risk (aka variance)! And when it comes to smart investing, everyone knows you can't separate risk and return...

Luckily, Ben Carlson, one of my favourite personal finance authors, re-did the analysis & found that:

“The difference between the best and worst-case scenarios when you invested a lump sum was much larger than the dollar cost-averaging strategy. And the volatility of the end results was twice as high.”

Now we've got the full picture! 📷 

So, is double the risk worth the extra few percent, on average? 

Not for me! And especially not if that lump sum is large relative to my current portfolio.

It's far less risky make my periodic investments larger and dollar-cost average them in monthly intervals over a few years.

For example, let's compare a DCA vs lump sum investment of $8,000 during an 8-month period of sideways movement & high volatility .


Graph demonstrating a lump sum investment of $8000 during an 8-month period of sideways movement and high volatility

Image credit

As you can see - in this example, the market’s gone nowhere, but because you’ve bought more when low and less when high, you’ve actually ended up making money!

As mentioned before, this doesn't usually happen - only when markets go down more than they go up over a period of time - but that's  exactly when you want it to happen!

So, now you've got the full picture - you make your own call on whether the extra return is worth the extra risk & stress ✌

⇑ Back to Top

Calculating how often and how much you should invest

Since we each have unique goals, investing experience and financial circumstances, the amount and frequency you invest is completely dependent on you.  

However, there is a mathematically exact answer once you’ve figured those things out.

How often you should invest is an optimisation based on the following five factors:

  1. How often you save (preferably your pay cycle)
  2. The amount you save each time
  3. The interest rate you earn on your savings
  4. The return you expect to earn on your investments
  5. The amount it costs you to make a new investment

I'll explain each one below.

1. How often you save

This is the timeframe in which you make money decisions – whether that be weekly, fortnightly, monthly, quarterly or yearly.

After discussing and observing the behaviour of a lot of everyday investors, we’ve built the opinion that the most effortless timeframe tends to be whatever your period your paycycle is.


Well it allows you to automate transfers to a separate savings or investing account – preferably one that can’t be accessed from your transaction account – which reinforces a cycle of good investing behaviour.

This means you will perpetually pay yourself first.

But what if your income isn't consistent?

Then it's best to set your own pay cycle.

It's the easiest way to reach your financial goals.

2. The amount you save each time

The amount you save each time is entirely dependent on you.

Just make sure that it’s big enough to be meaningful but small enough to be sustainable.

Sustainable means you can keep investing similar amounts consistently and that the chances of you needing to access your investments within 10 years of making them are small.

It pays to analyse your expenses and future spending expectations before making this decision.

Also, you should be conservative – the last thing you want to do is sell assets when markets are down to move house / go on holiday / look for a new job.

If you’re not sure, just choose an amount you are 110% sure you can live without for the next 10 years and then build up from there as you become more comfortable.

You should not expect to ‘lose’ this money.

But you should be confident you won’t need it. 

3. The interest rate you earn on your savings

You can find your savings interest rate simply by looking up your current rate online or by giving your bank a call.

Currently, anything around 1.8% p.a. is competitive in Australia.

Alternatively, you might want to input a long-term average rate if you’d like to set and forget.

You’re investing for the long-term after all, and current rates are at all-time lows...

The chart below shows the RBA’s cash rate ( over the last 30 years.

RBA's cash rate graph from 1990 to 2020

Typically, competitive savings rates sit 1-2% p.a. above the cash rate (e.g. the current cash rate is 0.25% p.a).

So you could take an average of, say, the past 10 years and add 1.5% p.a.

If you’re not sure, take the conservative option and choose your current rate. 

4. The return you expect to earn on your investments

What you invest in is completely up to you.

The calculator below was built primarily for ETFs, LICs and index funds but will work just as well for any other liquid and diversified investment.

What does ‘liquid and diversified’ mean?

It means that it is easy to buy and sell given your purchase amount (liquid) and that the asset you’re investing in isn’t reliant on one sector, country or currency (diversified).

Only if an investment has these characteristics does it makes sense to DCA into it over time.

So it’s crucial that you make sure the assets you choose are sufficiently liquid and diversified.

Exchange-traded Funds (ETFs) which track the share market are typically the best place to start.

In Australia, the average total share market return over the past 30 years to 30 June 2019 was 9.4% p.a. Globally, that number is 7.2% p.a (source). 

As you can see, I've been unable to find a source that includes data to 30 June 2020, but the moral of the story remains the same!

Here's a graph of the relentless market returns of both Australian and global shares over time.

Graph showing Australian and global shares over time, specifically $10,000 growth over the past 30 years to 30 June 2019

Image credit

You'll note that Australia has outperformed global shares fairly significantly.

While I would love to say this will last, I think it's at least equally likely that the principle of reversion to the mean will take over & outperformance will not last.

Personally, I'd just be conservative and choose the global average - 7% p.a.  

5. The amount it costs you to make a new investment

How much does each new investment cost?

To invest in shares this is typically $10 - $20 per transaction for amounts less than $10,000 in Australia.

Our price here at Pearler is at the lower end of the spectrum ($9.50).

The basic rule is the more you earn the more frequently you can invest. This is because the expected earnings of your investments will ‘pay off’ the brokerage faster.

If you are investing using a service that doesn’t charge brokerage, then theoretically, you would invest every dollar of savings ASAP because there is no cost to making an investment.

These options do exist, especially outside of Australia.

But, be warned, you’re usually paying for this service in other ways – higher fund fees and worse execution prices.

The Optimal Investing Frequency Calculator

Below you’ll find a screenshot of our investing frequency calculator.

You now understand all the fields, what they mean and what the appropriate inputs are.

Once you complete the calculator, you’ll notice that your optimal investing frequency doesn’t have a massive effect on the value of your investments after 10 years.

This itself is a useful insight – the amount you invest and the fact that you’re investing regularly at all (and not relying on a savings account) are each far more important than getting your frequency just right.

But still, optimising your frequency will take you 5 minutes and likely save you a few thousand dollars over 10 years.

That’s a pretty good hourly rate by anyone’s standard.


Pearler's investing frequency calculator

And that's it!

Time to calculate your own optimal investing frequency 🚀

Happy investing!



⇑ Back to Top


At Pearler, we pride ourselves on the quality of the general financial advice we give. Please note though, that this advice has not been tailored for you. You have unique financial goals, circumstances and needs which may make this advice inappropriate, and it is important that you know whether it applies to you. If you are unsure we urge you to speak to someone you trust who is competent with money and understands your individual needs, whether they be a trusted friend or accredited professional

Download Aussie FIRE Now

We've worked with Australia’s top FIRE experts to create Aussie FIRE: The Ultimate Guide to Financial Independence for Australians.

It covers all the knowledge, processes and tools you need to succeed on your journey - from taking your first step to becoming FIRE'd!

Subscribe and we will email you a link to download Aussie FIRE and keep you updated with all things Financial Independence in Australia.

eBook cover page v2-2