DCA vs Lump Sum

What are we comparing?

• Lump sum: you invest all available cash into your chosen portfolio immediately.
• Dollar-cost averaging (DCA): you break that lump into equal pieces and invest on a schedule (for example monthly over 6–12 months).
• Context: both assume the same final target allocation. Only the path differs.

Use cases

• DCA for lump sums: good when volatility is high and your main risk is emotional (fear of buying the top).
• Lump sum: mathematically better most of the time in rising markets, especially when your horizon is long.
• Ongoing income: automatic monthly investing from a paycheck is just DCA by default and works well for most people.
• Risk capacity: if a 20–30% drop in month one would make you abandon the plan, shorter DCA can be a useful guardrail.

What the data usually shows

Studies comparing “all at once” vs “over 6–12 months” in stock-heavy portfolios find a consistent pattern.

• In markets that rise more often than they fall, investing earlier exposes money to growth for longer. Lump sum wins more frequently.
• DCA tends to reduce the chance of buying exactly before a drop, but leaves more cash sitting on the sidelines when markets grind up.
• The difference in outcomes over a lifetime often matters less than the difference between “invested” and “never invested”.

The DCA vs Lump Sum study on this site uses historical data to show how often each approach wins.

Practical rules of thumb

• Fresh lump sum you are scared to invest: choose a DCA window (for example 6 months), fix the dates, and automate the transfers. Do not stretch it indefinitely.
• Regular income: set a recurring monthly contribution and treat it as a bill. This is DCA that never stops.
• Market noise: do not adjust your schedule based on headlines. Otherwise you lose the whole point of DCA.
• One-shot windfalls: if you can stomach volatility and have a long horizon, lump sum is usually fine and often better.