Does Dollar-Cost Averaging Work? Evidence from ETFs and Funds
In the typical fall of 10% or more, a monthly plan one year old lost 69% as much as its fund, and a plan ten years old 94% as much.
Quantlake DCA Study · data through 30 September 2026 · updated 27 October 2026 · refreshed quarterly
Two things to take away. The cushion from monthly investing is mostly an early-years effect: the older the plan, the more of its fund's fall it took.
Waiting for better prices worked, and almost nothing was left after paying for the wait: the best timing rule ended +0.09% against the plain schedule, once the months its money waited in cash were paid for.
If you invest a fixed amount every month, four questions determine the result: how much of a decline the plan absorbs, how often the account falls below cumulative payments, whether purchase timing adds value, and whether contributions continue through declines. This page measures the first three. The fourth is the subject of Why Investors Choose Dollar-Cost Averaging.
What is dollar-cost averaging?
Dollar-cost averaging means investing equal amounts at regular intervals, regardless of market conditions. FINRA, the US broker regulator, defines it as investing "in equal portions, at regular intervals, regardless of current market conditions" (FINRA); the academic literature uses the same definition, periodic purchases of equal dollar amounts (Constantinides, 1979, Journal of Financial and Quantitative Analysis).
A plan in this study is dollar-cost averaging into one fund: $1,000 invested on the first trading day of every month from a given starting month, with one plan for each starting month in each fund. The exception is the three model portfolios, Bogle-, Swensen- and Buffett-Inspired, which split each payment across several ETFs.
Two things called dollar-cost averaging
The term covers two different decisions. The first is investing part of a regular income each month, whether from salary, pension, or rent: the cash arrives over time, and the decision is whether to invest each part when it arrives. The second is spreading a sum already in hand over several months instead of investing it on day one. Most arguments about dollar-cost averaging combine the two. This page covers the monthly plan. The lump sum case has its own study, Lump Sum vs Dollar-Cost Averaging.
What this study shows
- The cushion fades as the plan grows. In a typical decline of 10% or more, the account fell 69% as much as its fund at one year, 86% at five, 94% at ten and 98% at twenty.
- Plans still dip below after year five. The median ETF's ten-year plans dipped under their payments at some point after year five in 57% of starting months, and under those payments carried forward by prices in 77%.
- A monthly plan does not rescue a losing fund. Of the plans that ran through the ETFs' losing decades, 54% ended below the money paid in.
- Timing the purchases changed the money little. Across 44 rules, five-year final wealth averaged across the funds moved by a median −0.58% against the schedule, and only one rule ended ahead.
- The decisions around the plan moved it more. Starting five years later raised the payment needed for the same final value by 64%; a twelve-month pause in year one cost 1.8 times the money skipped.
Does dollar-cost averaging reduce risk?
A fixed monthly amount buys more shares when prices are low and fewer when they are high, with no forecast involved. Its measurable effect appears in a crash early in the plan.
A fall, or decline, is a drop of 10% or more from a fund's highest close to its lowest close before it regained that high. Our study measured 625 such declines across the ETFs, each against a plan started a year before the fund's high. 461 of them bottomed inside one of 15 market-wide episodes, stretches when the median ETF stood 10% or more below its own high. "Typical" on this page means the median, and each figure names its population; here, those declines.
In the typical decline, a plan that had been running for a year when its fund peaked lost 69% as much as the fund. A 20% drop in the fund meant a drop of about 14% in the account. Two things make the difference: the payments made during the decline add new money to the account, and they buy at lower prices.
SPY (S&P 500) fell 55.2% from its high on 9 October 2007 to its low on 9 March 2009. A plan started one year before the high fell 33.9% over the same months. A plan started ten years before fell 49.4%.
What DCA does not do
The cushion fades as the plan ages
The cushion fades as the account grows. In the typical decline, a plan ten years old lost 94% as much as its fund, and a plan twenty years old 98%. The long-history mutual funds show the same curve: 66% one year in, 98% twenty years in.
A plan can still fall below the money paid in
Nearly every plan is worth less than the money paid in on some day of its first year, because its first payments have had no time to grow. The figures below measure how long that risk lasts. We started a ten-year plan in every month of every fund old enough for one: 86 of the 90 ETFs, the other 4 being too young. That makes 11,492 ten-year plans in all. Each fund is summarised on its own plans first. The figures below are the middle fund's, so no single fund can carry them.
In the median ETF, 92% of the ten-year plans dipped below the money paid in at some point after their first year. After their fifth year, 57% still did, and after their ninth, 7%. The plans that fell below after year five bottomed at a median 12.7% under the money paid in. The long-history funds ran twenty-year plans, and in the median fund 12% still fell below after year ten, none after year eleven.
The figure depends on the starting decade. In the median long-history fund, no plan started in the 1980s fell below the money paid in after its third year. Of the plans started in the 1990s, 71% still did after year five; of those started in the 2000s, 68%.
The 1990s plans bought above the prices that followed. A monthly plan in the Vanguard 500 fund started in January 1996 had made 65 of its 82 payments at prices above the fund's close on 9 October 2002, the low of the 2000-2002 fall. What a Market Crash Does to a Monthly Investment Plan shows the three decades side by side.
Inflation makes the test stricter. Each payment is carried forward by the rise in consumer prices, and the benchmark is what that money must be worth today to match its purchasing power at the time. Against that benchmark, 77% of the median ETF's ten-year plans still fell below after year five, with a median low point 19.1% below it.
The table holds two measures. One records whether a plan stood below the money paid in on that anniversary itself. The other records whether it fell below at any point after it. At five years the first measure is 6% of starting months, and the second is 57%.
For the median ETF, no ten-year plan stood below its payments on its tenth anniversary. That zero covers ending points only. In the S&P Composite since 1871, 45 of 1,747 ten-year plans ended below the money paid in, and 26 of them started in the 1920s.
For the median ETF, the median plan spent 7.4% of its days below its payments, and 14.9% after inflation.
Ending there is rarer than dipping there. The median ETF had no ten-year plan finish under its payments. Averaged across all 86 ETFs, 4.8% did, and those sit in a few funds (the share of each fund's plans in brackets): DBA (Agriculture Basket) 50%, MCHI (China) 44%, SLV (Silver) 39%, EWZ (Brazil) 29%, TLT (Long Treasuries) 29%, FXI (China Large Cap) 28%. After inflation, 7.5% of the median ETF's plans ended below, and 19.9% averaged across ETFs.
A monthly plan does not rescue a fund that loses for a decade
Every fund in this study still exists; funds that closed after a bad decade are missing. The data does hold the survivors' own losing decades: ten-year windows in which the fund lost money, dividends included.
4.9% of the ten-year ETF plans, 561 of them, ran through one, across 27 ETFs. DBA (Agriculture Basket), XLF (Financials), EWZ (Brazil), and SLV (Silver) appeared most often.
Across those plans, the median fund return was −2.1% a year and the median plan return was −0.8% a year on the money paid in. 54% finished below their payments.
A plan finishes above its payments when its last price is above the average price it paid per share. Where the fall sits in the decade therefore decides the result.
A ten-year plan in the S&P Composite that started at the September 1929 peak made 86 of its 120 payments after the June 1932 low. The index returned −36.4% over those ten years. The plan ended +32.4% on the money paid in.
A plan started in July 1922 ended at that low, and every payment but the last was made above the ending price. The index returned −3.7% over its ten years. The plan ended −47.1%.
What timing the purchases changed
We tested 44 rules that change the timing of the monthly contribution. Four illustrate the set:
- Hold the month's money in Treasury bills until the fund is 10% or more below its highest close, then buy.
- Buy only while the price is above its 200-day average, and wait while it is below.
- Buy when the 14-day relative strength index is above 60, the level that marks a fund as firmly strong.
- Buy when the fund's recent volatility sits below its own past-year norm, on the view that calm markets are better entries.
The set also includes rules with no market condition, such as holding each payment to the last trading day of the quarter, as a control.
Measured fund by fund on five-year plans, against the same plan bought on schedule, the median rule moved final wealth by −0.58%. One rule ended ahead; the other 43 ended behind, by up to −7.53%.
Buying after falls does secure better prices. The one rule that ended ahead is a variant of the first example, with the fall sized to the fund's own volatility and read on week-end closes: it kept each month's contribution in Treasury bills until the fund stood at least one year's worth of its own volatility below its highest weekly close, then invested the full balance. Across five-year plans, the better entry prices added +4.94% to final wealth; the months spent waiting cost 4.85%. Across the ETFs in the test, the net effect averaged +0.09%. The better prices covered the waiting cost, and little more.
The ride was smoother. In the median ETF of the 82 it ran on, the rule's deepest decline was 6.3 points shallower than the plain schedule's, and 98% of its plans fell less far. The median account also kept 43% waiting in Treasury bills.
The calm came from that cash. Against a plan holding the same share in cash and investing the rest on schedule, the smoother ride almost disappeared: on a measure of how deep and how long a plan stays below its high, the rule's lead was 3.7 points against the schedule and 0.09 against the same-cash plan.
A sum already in hand: at once or spread out
With the money already in hand, investing it all at once beat feeding it in over twelve months in 68% of starting months, averaged across the 90 ETFs and measured five years later. In the median ETF's median start, spreading the purchases cost 3.1% of final wealth and reduced the first year's deepest dip from 5.7% to 2.8%.
The study of the S&P Composite series since 1871
The ETF prices in this study start in 1993, and the mutual funds start in 1979. Robert J. Shiller's monthly S&P Composite series, the index behind the S&P 500, runs from January 1871 to June 2026 with dividends. That span allows the same $1,000 monthly plan to start before 1929, before the 1970s, and before every crash since. The study runs one plan per starting month. The reported return is money-weighted: the yearly rate that turns the stream of payments into the final value.
A monthly plan's yearly return depended on the month it started:
Ten-year plans ranged from −13.6% to +26.9% a year, and the middle eight in ten ranged from +2.8% to +16.8%. Thirty-year plans narrowed the range to +2.3% through +15.6%, and the middle eight in ten ranged from +6.7% to +13.2%. The worst ten-year plan started in July 1922. The worst thirty-year plan started in July 1902. A ten-year plan fell below cumulative contributions at some point after year five in 38% of starting months.
Ten-year plans started in the 1920s finished under their payments 22% of the time, the highest share of any decade; against the money paid in carried forward by inflation, 63% of those started in the 1960s did.
Three limits travel with these figures. The figures use monthly averages of daily prices, which smooth each low. The index charges no fund fee. The sample covers one country's market.
What moves the result more than timing?
Three decisions around the plan carry costs of their own: when it starts, whether it pauses, and whether it stops in a decline. The first two are for the median of the 43 ETFs with twenty years of prices, on twenty-year plans, with the 27 mutual funds beside them.
- Starting later. Waiting one year to start raised the monthly amount needed to reach the same final value by the same date by 10%; waiting two years, by 20%; five years, by 64%, and by 62% in the median mutual fund.
- Pausing early. A twelve-month pause in the first year cost 1.8 times the money skipped in the median ETF and 1.8 times in the median mutual fund, because that money would have compounded for nineteen more years. The same pause in year nineteen cost 0.4 times.
- Stopping in a decline. On five-year plans, stopping purchases after a fall of 20%, 30% or 40% and restarting only when the price regained its old high ended 2.4% to 2.8% of final wealth behind stopping for the same length of time on random dates, averaged across the ETFs.
The third is measured in the unit the timing rules are, final wealth: stopping in a decline ended 2.4% to 2.8% behind, against +0.09% for the buy-after-a-fall rule above. The first two are measured as a payment and as a multiple of the money skipped.
What a backtest assumes about the investor
Every plan on this page pays in on the first trading day of every month and never misses one. That is an assumption about the investor. The same prices answer two questions: what the market did to a plan that was followed, and, in the section above, what not following it cost.
The prices do not say why a plan stops: income stops, a house is bought, the money is needed before the plan ends. No figure here describes a plan that was never affordable.
Why a fall makes an investor pause or stop, and why spreading a sum feels safer than investing it at once, is the subject of Why Investors Choose Dollar-Cost Averaging.
The same plan in three model portfolios
Three Quantlake Classic model portfolios, each a fixed mix of ETFs bought for $1,000 a month, are backtested to September 2026. From January 2010, $201,000 became $657,343 in Bogle-Inspired and $448,964 in Swensen-Inspired; from January 2003, $285,000 became $1,469,772 in Buffett-Inspired, 90% S&P 500 and 10% short-term Treasuries. The model-portfolio tracker is updated once a month.
Method and limits
- Universe. 90 US-listed ETFs and 27 US mutual funds; every fund, the selection rules and what was left out are on the methodology page.
- Weighting. Each fund counts once: its plans are summarised first, then the median fund is taken. Counting every plan once instead moves the headline shares by at most 1.1 points.
- Overlap. Plans started a month apart share most of their history, and most falls belong to a few market-wide episodes: 15 since the end of 1998, listed on the methodology page. The episodes are the effective sample size.
- Survivorship. Every fund here exists today. Funds that closed after a loss are missing, which flatters the figures; the surviving funds' own losing decades stand in for them only in part.
- The long record. R. J. Shiller's monthly S&P Composite data (shillerdata.com), January 1871 to June 2026, where his dividend column ends and so the series does: each month's price is the average of its daily closes, one twelfth of the annual dividend is reinvested each month, and the 1 basis point spread applies with no fund fee.
- 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
- What a Market Crash Does to a Monthly Investment Plan
- What If You Invested $1,000 a Month in an ETF Portfolio?
- Lump Sum vs Dollar-Cost Averaging: A Study on ETFs and Funds
- Quantlake DCA Study: Method and Fund List
- Why Investors Choose Dollar-Cost Averaging
- Quantlake model portfolios: Classic and Smart
- Compound interest calculator with volatility, inflation and fees
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