DCA vs Lump Sum

You get a pile of cash. Do you invest it all at once or drip it into the market over time? This study shows how a simple DCA schedule compares to a one-shot lump sum.

TL;DR

Lump sum usually wins on long-term growth if markets go up on average.
DCA smooths the ride and can hurt less if you invest right before a drawdown.
The real question is whether you can emotionally handle a bad outcome right after investing.

Method

We compare two ways of putting the same total amount into a broad US stock index over one year:

Lump Sum: Invest 100% of the capital in Month 1 at the prevailing price and hold.
DCA (12 months): Split the same total into 12 equal chunks and invest once per month from Month 1 to Month 12.

Both paths are then held for the remaining period with no further contributions. Returns are modeled on monthly total returns of a broad stock index; fees and taxes ignored.

This is an illustration of behavior, not a precise replay of a specific ETF in a specific window.

Notes

Both approaches invest the same total amount; only the timing differs.
DCA is not “more money” being added. It’s the same capital spread over 12 buying points.
Lump sum is more exposed to the market earlier, for better or worse.
Educational only. Not personalized investment advice.

Key Chart

Normalized value of a one-time lump sum versus a 12-month DCA schedule. Both invest the same total amount; the gap is the cost or benefit of waiting to get fully invested.

What the data says

In a market that drifts upward over time, lump sum usually finishes ahead because more of your money is exposed to growth earlier. DCA lags a bit because part of the cash is sitting on the sidelines waiting to be deployed.

Where DCA helps is the path: if your start date is unlucky and a drawdown hits right after you begin, the lump-sum line takes the full hit. The DCA line only has a fraction invested early on, so the early pain is muted.

The summary table below uses stylized numbers that match the chart: lump sum a bit ahead on CAGR, DCA a bit smoother on drawdowns.

When lump sum may fit you

You have a long horizon and accept that short-term moves are noise.
You’re investing into broad, diversified index funds, not a few speculative names.
You won’t panic if markets drop right after you invest.
You care more about expected growth than about smoothing the first year’s path.

When DCA may be a better dial

A sudden large lump sum makes you nervous and likely to second-guess yourself.
You’re worried specifically about “bad timing” around a recent run-up.
You prefer a pre-committed plan (12 buys) over a one-shot decision.
You know you’ll stick with the DCA schedule even if the first few months feel rough.

The biggest mistake is not that you chose DCA instead of lump sum; it’s bailing out of whichever plan you picked when the first drawdown hits.

Summary

Series	CAGR	Max DD	Worst 12-mo
Lump Sum (Month 1)	≈6.2%	≈−15.0%	≈−12.0%
DCA (12 Months)	≈5.8%	≈−11.0%	≈−9.0%

Stylized values consistent with the chart. Real outcomes depend on the specific start date and market path.

Ready to put a plan on rails? Set up either a one-time deploy or an automated DCA schedule at a broker you can actually stick with.

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Want to see different paths? Use TradingView to inspect past drawdowns and ask yourself how you’d feel if your lump sum landed right before one.

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Bottom line

Lump sum is mathematically favored in an upward-trending market, but DCA can be psychologically safer. Pick the plan you’ll actually follow through an ugly first year—and then leave it alone.

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