LeadAfrik

Dollar-cost averaging vs investing it all at once.

You have a windfall. Invest the whole amount today, or spread it over months? We Monte Carlo both strategies across thousands of return paths and show the distribution of outcomes.

SO

Built and reviewed by Stephen Omukoko Okoth

Mathematical Economist · ex-Morgan Stanley FI · Equilar

Inputs

The decision

Currency

Inputs

Market assumptions

Verdict

Lump sum wins in 66.0% of futures.

Median advantage: $ 7.2K for lump sum.

Markets generally trend up, so getting your money in early captures more upside. DCA earns its keep through discipline — fewer regret-based exits — not through higher expected return.

Result

Both strategies, compared

Lump sum median

$ 198.2K

DCA median

$ 191.4K

Lump sum P5 (worst)

$ 87.5K

DCA P5 (worst)

$ 84.3K

Lump sum P95 (best)

$ 453.2K

DCA P95 (best)

$ 425.3K

Distribution

Lump sum minus DCA

Bars to the right of zero are paths where lump sum beat DCA. The distribution should skew slightly right — the long upside tail.

Common questions

Which usually wins, DCA or lump sum?

Lump sum wins on average — about two-thirds of historical 10-year windows in US data. The market trends up, so getting all your money in early captures more upside. DCA wins in down-trending markets and reduces regret-based mistakes.

Why use DCA at all then?

Behavior. If a 30% drawdown right after you invest would make you sell at the bottom, DCA is buying yourself the discipline to stay in. The slightly lower expected return is cheap insurance against the much larger cost of mistiming an exit.

How does the simulation work?

We sample monthly returns from a normal distribution centered on your expected return with the volatility you set. Each iteration is one realized future. With 2,000 iterations, you see the full distribution of outcomes for both strategies.

What return and volatility should I use?

Long-run global equity defaults: 8% nominal return, 16% annual stdev. Bonds: 4% / 6%. A 60/40 portfolio: ~6.5% / 10%. The Sharpe ratio matters more than the levels — increasing both proportionally shrinks DCA's edge.