I know there is evidence out there which suggests that a lump sum investing approach will outperform a dollar-cost averaging approach approximately 2/3 of the time, e.g. https://pressroom.vanguard.com/content/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf.

I've also heard that value averaging can be a more effective approach than dollar cost averaging.

My question is whether there are comparisons out there (using historical data) to see whether or not a lump sum or a value averaging approach is more successful?

  • 3
    I'm pretty sure that with the right selection of periods you can show either to outperform the other. What would that mean to you?
    – littleadv
    Commented Nov 30, 2014 at 7:36
  • the time periods for any studies will be during a time of unprecedented economic growth in the United States and worldwide. This time does not exist any longer and people will not expect those returns. Similarly, Vanguard manages money and is better off when it can charge people a % of a larger deposit, than a % of a smaller incrementally growing deposit
    – CQM
    Commented Dec 2, 2014 at 22:03
  • Do you have deep enough pockets to always do the value averaging? If an investment goes down enough, it may be hard to have enough cash to restore the balance only by buying additional shares.
    – JB King
    Commented Jan 13, 2016 at 16:22

2 Answers 2


There are a number of scholarly articles on the subject including a number at the end of the Vanguard article you reference. However, unfortunately like much of financial research you can't look at the articles without paying quite a bit.

It is not easy to make a generic comparison between lump-sum and dollar cost averaging because there are many ways to do dollar cost averaging. How long do you average over? Do you evenly average or exponentially put the money to work? The easiest way to think about this problem though is does the extra compounding from investing more of the money immediately outweigh the chance that you may have invested all the money when the market is overvalued. Since the market is usually near the correct value investing in lump sum will usually win out as the Vanguard article suggests.

As a side note, while using DCA on a large one time sum of money is generally not optimal, if you have a consistent salary DCA by frequently investing a portion of your salary has been frequently shown to be a very good idea of long periods over saving up a bunch of money and investing it all at once. In this case you get the compounding advantage of investing early and you avoid investing a large chunk of money when the market is overvalued.


In general, lump sum investing will tend to outperform dollar cost averaging because markets tend to increase in value, so investing more money earlier will generally be a better strategy. The advantage of dollar cost averaging is that it protects you in times when markets are overvalued, or prior to market corrections.

As an extreme example, if you done a lump-sum investment in late 2008 and then suffered through the subsequent market crash, it may have taken you 2-3 years to get back to even. If you began a dollar cost averaging investment plan in late 2008, it may have only taken you a 6 months to get back to even.

Dollar cost averaging can also help to reduce the urge to time the market, which for most investors is definitely a good thing.

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