Lump Sum vs Dollar-Cost Averaging
Got a windfall - a bonus, an inheritance, a 401(k) rollover? Conventional wisdom says ease in slowly. But because markets rise more often than they fall, investing it all at once has historically beaten spreading it out most of the time. Here's the backtest across every starting point since 1928.
Lump sum won
0%
Avg lump advantage
0%
DCA won
0%
DCA's best win
-
$
S&P 500 (total return), each tranche at the start of the year
Lump sum vs DCA, by starting year
Lump sum ended ahead DCA ended ahead - each bar is how much lump sum beat (or trailed) DCA for that start year.
Backtest uses annual S&P 500 total returns (Damodaran/NYU), 1928–2025. "Lump sum" invests the whole amount at the start of year one; "DCA" invests an equal slice at the start of each year over the spread, with uninvested cash assumed to earn nothing. Both are valued at the end of the spread. Because stocks rise in about two-thirds of years, lump sum usually wins - dollar-cost averaging mainly helps when you'd have bought right before a crash, and its real value is behavioral (it's easier to stomach). The classic Vanguard study finds lump sum wins ~68% of rolling 12-month periods; spreading over more years widens the lump-sum edge.