Got a bonus, inheritance, or sale proceeds to invest? Lump sum beats DCA in roughly two-thirds of historical periods. See the maths.
The lump available, the DCA window, and your return assumptions.
Lump-sum ahead by £2,555 (%) on expected value
On expected value, lump-sum lands at £181,940 versus £179,385 for -month DCA, a £2,555 gap (% of final). Roughly two-thirds of historical periods favour lump-sum.
Illustrative figures only. Expected value across history is not a guarantee in any specific window. For your specific situation, consult a qualified adviser.
Worth carries the expected-value lens into every windfall decision. When the maths favours one path and the psychology another, the right answer is usually the one you will actually execute. Join the waitlist.
Most days, markets are at or near all-time highs. That is what bull markets look like. Studies show no consistent edge to waiting after all-time-highs versus investing immediately. The valuations-are-stretched argument has been made continuously for decades; almost everyone making it has missed substantial returns.
Those are different. Pension and 401(k) contributions come from monthly income, not from a lump sitting on the sidelines. The lump-versus-DCA question only applies when you have a pile of money that could be invested today.
Because while you DCA, on average half the money is sitting in cash earning less than equities. That foregone return is the expected cost. The longer the DCA window, the bigger the expected gap.
When the lump is large relative to your portfolio and the psychological cost of a near-term crash would push you out of the market entirely. Splitting over a few months is then rational. DCA across years rarely is, on expected value.