DCA vs lump sum investing calculator

DCA vs lump sum — the math says lump sum wins ~⅔ of the time

The most-debated personal finance question, settled by Vanguard's 2012 paper "Dollar-Cost Averaging Just Means Taking Risk Later":

Lump-sum investing beats DCA in 67% of historical 10-year periods in the US, UK, and Australia. The reason is simple: markets go up more than they go down. Every month you delay deploying capital is a month with positive expected return that you missed.

When DCA wins

DCA wins when the market drops during the spread period. If you're DCAing into a market that falls 20% over 12 months, your average cost basis is meaningfully lower than a single buy at month 0. About 33% of historical 10-year periods.

When lump sum wins

Everywhere else. The mathematical intuition: if you believe stocks have positive expected return, then "money in the market" beats "money on the sidelines waiting to be deployed." Period.

So why does anyone DCA?

Behavioral reasons. A 100% lump sum on Monday that drops 15% by Friday is psychologically devastating, and the wrong reaction (panic-sell at the bottom) costs more than the math optimization saved. DCA reduces regret risk.

The honest framing: lump sum is the expected-value-optimal strategy. DCA is the regret-minimization strategy. Pick based on what you'll actually stick with through a 30% drawdown.

What this calc shows

• Expected value: average outcome at 12 months, given your assumed return
• Lump sum advantage: dollar gap in average case
• Win probability: rough estimate calibrated to expected return / volatility ratio
• DCA cost basis: smoothed average price you bought at