Why Investors Choose Dollar-Cost Averaging
Investing a sum at once beat spreading it over twelve months in 68% of starting months, and investors still spread it. Meir Statman gave four reasons, set here beside our figures.
Quantlake DCA Study · data through 30 September 2026 · updated 27 October 2026 · refreshed quarterly
Two things to take away. Spreading a sum bought a shallower first year: the median deepest dip went from 5.7% invested at once to 2.8% spread over twelve months, and from 27.1% to 15.4% in one start in ten.
Departing from the plan had a cost. In the study, starting five years later raised the payment needed to reach the same final value by 64%, and a twelve-month pause in year one cost 1.8 times the money skipped.
The behavioral mechanisms on this page are Statman's; the Quantlake DCA Study does not test investor psychology. Its figures show the financial situations in which those mechanisms would act.
A monthly plan and a spread lump sum both put money into the market gradually. For a monthly plan the pace is set by when the money arrives; for a sum already in hand it is a choice, and the reasons for it are not in the prices.
What this study shows
- Investing at once usually finished ahead of twelve months of spreading, with a sum already in hand.
- A plan is not the smooth curve it is pictured as. Buffett-Inspired sat below its own 12.0% compounding line in 251 of its 285 months.
- Departing from the plan cost more than timing it gained. Stopping in a decline until the old high returned cost more final wealth than the best timing rule added.
What the math says
Our study priced both sides of the lump-sum question on 90 ETFs. Investing a sum at once ended ahead of spreading it over twelve months in 68% of starting months, measured five years later. Spreading cost 3.1% of final wealth in the typical start. In exchange the first year was shallower. The full table is in Lump Sum vs Dollar-Cost Averaging.
For money that arrives each month there is no such comparison to lose: the money is not there to invest earlier. That study is Does Dollar-Cost Averaging Work?, and the two questions are kept apart throughout.
Four reasons investors spread a sum
The framework is Statman's, in the Journal of Portfolio Management (Statman, 1995), and his conclusion was that the behavior is normal even where it is not rational. His four mechanisms are below, each with the figure in our study it acts on.
Prospect theory
Losses are felt more heavily than equal gains (Kahneman and Tversky, 1979). Spreading a sum splits one entry price into many, so the account is compared against an average of the prices paid. The money paid in is that average, and how much of a plan's life sits under it can be counted.
In the median ETF, a ten-year monthly plan spent 7.4% of its days below the capital contributed and 14.9% below contributed capital after inflation.
Aversion to regret
A single entry price is a decision tied to one date. Spreading the entry removes any one day as the decision point, and a decline is harder to trace to a single choice.
Our figure: the deepest first-year dip on a sum invested at once was 5.7% in the median start and 27.1% or more in one start in ten; spread over twelve months, 2.8% and 15.4%. Spreading took 11.6 points off the dip in one start in ten and 2.9 in the median start.
Cognitive errors
Recent falls are read forward: a decline is taken as the start of a longer one. A schedule keeps buying through them.
Our figure: across the 44 rules our study tested for timing the monthly purchase, most of them conditional on the market, the median moved final wealth by −0.58%, and one ended ahead of the schedule, by +0.09%.
Self-control
A schedule is a commitment made once, in advance. Each month's purchase then needs no decision, whatever the market did that month.
Our figure: a twelve-month pause in the first year of a twenty-year plan cost 1.8 times the money skipped, and stopping in a fall until the old high returned ended 2.4% to 2.8% of final wealth behind stopping for as long on random dates.
A plan is not a smooth curve
A monthly plan is usually pictured as a compounding curve: a steady rate, no volatility, the line bending upward. That curve is fitted afterward to the final value.
Buffett-Inspired, one of Quantlake's model portfolios, has returned 12.0% a year on the money paid in since January 2003. Below, the same payments grow at a steady rate to the same final value, against what the account actually did.
The two lines start together and finish together, and the account was under the steady one in 251 of its 285 months, including an unbroken run from November 2007 to November 2021. An investor holding it saw a plan that trailed its own average rate for 14 years and finished exactly on it.
The account also fell 37.7% from its own high at the worst. It spent 4.9% of its days below the money paid in. It was last below that on 6 July 2010.
The annual rate itself depends on the day it is measured. Below, one plan of $1,000 a month in SPY from its first month of trading, measured at each age with the same steady line fitted to that date.
Asked after 3 years, the plan had returned +20.2% a year; after 10, +4.7%; over the whole 33.8 years, +10.8%. Each figure is correct for its date. A calculator that compounds one rate draws the steady line.
The record behind it is not smooth either. Since 1998 the market has had 15 episodes in which the median ETF stood 10% or more below its own high. In the typical fall of 10% or more, a plan one year old lost 69% as much as its fund and a plan ten years old 94% as much. The crash study measures it by plan age.
Holding a plan for twenty years
Two things move over a plan's life, and only one is in the prices. The market's part is measured: 15 episodes, a plan below the money paid in on 6% of fifth anniversaries in the median ETF, and dipping below at some point after year five in 57% of starting months.
The other part is not: income stops, a house is bought, a payment affordable at the start stops being affordable. A backtest pays in on the first trading day of every month for as long as it is told to. Its figures are the strategy as followed, with no investor's life in them.
The same holds for a sum invested at once. The 68% it won in is a five-year figure, collected only by an investor still holding the position five years later.
The decisions around a plan moved the result more than the timing inside it. Stopping purchases in a decline until the old high returned ended 2.4% to 2.8% of final wealth behind; the best timing rule moved it by +0.09%. Starting five years later raised the payment needed for the same final value by 64%.
What this page measures
- The mechanisms are cited, not measured. Prospect theory, regret, extrapolation and self-control come from the work linked above. Nothing in our data tests them.
- The figures are ours. Every number here is from the Quantlake DCA Study, on 90 US-listed ETFs and 27 US mutual funds, with the rules and limits on the methodology page.
- No investor is described. A share measured across past starting months is a frequency in this record. It gives no probability for one person.
- Taxes are not modelled. Taxes on dividends and on sales are left out of every figure. Depending on the account and the country, they can change the final outcome.
Frequently asked questions
Related
- Does Dollar-Cost Averaging Work? Evidence from ETFs and Funds
- Lump Sum vs Dollar-Cost Averaging: A Study on ETFs and Funds
- What a Market Crash Does to a Monthly Investment Plan
- What If You Invested $1,000 a Month in an ETF Portfolio?
- Quantlake DCA Study: Method and Fund List
- Quantlake model portfolios: Classic and Smart
- Compound interest calculator with volatility, inflation and fees
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