DCA vs Lump Sum: What $100,000 of Data Shows
You just got $50,000. Invest it all today or spread it over 12 months? The data has a clear answer.
Vanguard analyzed every rolling 12-month period from 1926-2021. Lump sum investing beat dollar-cost averaging 68% of the time, with an average advantage of 2.3%. The reason is simple: markets trend upward. Every month you wait is a month your money misses out on expected positive returns.
When DCA Wins
The 32% of periods where DCA won were mostly during market downturns. If you invest a lump sum right before a crash, DCA would have been better. But you cannot know in advance when crashes will happen — and waiting for a crash costs more on average than investing immediately.
The Practical Answer
If investing the lump sum would not let you sleep at night, DCA over 3-6 months is a reasonable compromise. The behavioral cost of panic-selling after a lump-sum crash far exceeds the 2.3% average advantage of lump sum. The best strategy is the one you can stick with emotionally.