Is lump sum or dollar cost averaging better?

In this test, the lump sum won about 3 times out of 4. Investing $10,000 all at once beat spreading it over 12 months in 272 of 358 start months (76%) after 1 year, and in 182 of 250 (73%) after 10 years.

How much does dollar cost averaging cost?

On average, spreading $10,000 over 12 months left $439 less after 1 year and $780 less after 10 years. On a $100,000 rollover that is $7,800. A 6-month spread cost about half as much.

What if I invest a lump sum right before a crash?

All in on October 1, 2007, just before the peak: $7,682 a year later, against $8,590 spread over 12 months. Ten years later it was $20,162 against $22,547: spreading out won, and both more than doubled.

Does dollar cost averaging reduce risk?

It reduces scary moments, not losses. In the first year the lump sum showed a 20%+ loss in 37 of 358 start months and the 12-month plan in 9, but after a year both were below $10,000 in exactly 72 start months.

Is dollar cost averaging better when cash pays 4%?

Not in this test. In start months when T-bills paid 4% or more, the lump sum still won 80.67% of the 1-year comparisons and 74.12% of the 10-year ones.

Why does lump sum investing usually win?

Because stocks usually beat cash: the S&P 500 beat T-bills over the next 12 months in 78.77% of the 358 start months. Money waiting its turn misses those gains, and once the last purchase is made both plans own the same fund.

Test #12 · Published November 4, 2026

Lump sum vs dollar cost averaging: we tested every start month since 1996

By JJ, host of The $10K Test · November 4, 2026 · How the tests work

Watch on YouTube · Subscribe to the channel

My verdict: PARTLY TRUE.

The short answer: In this test, putting it all in at once usually won. Over 358 start months since 1996, a lump sum beat spreading $10,000 over 12 months in 272 of 358 (76%) after 1 year, and the 12-month plan cost $780 per $10,000 on average after 10 years. Spreading it out was safer for your nerves in year one, not safer for your money.

The key numbers

All at once beat spreading over 12 months in 272 of 358 start months (76%) after 1 year, 75% after 5 years and 73% after 10 years.
On average the 12-month plan cost $439 per $10,000 after 1 year and $780 after 10 years. On a $100,000 rollover: $7,800.
The scary case is real: all in on October 1, 2007 left $7,682 a year later, against $8,590 spread over 12 months.
The reverse is bigger: start in March 2009 and spreading out was $13,172 behind after 10 years.
After 1 year, both plans were below $10,000 in exactly the same 72 of 358 start months.

The claim

If you get a big chunk of money, like an inheritance or a 401(k) you roll over when you retire, the usual advice is: don't put it all in at once. Dollar-cost average instead: put in a little every month for a year, so a crash right after you start doesn't hit all of it. Vanguard's research says the opposite: "Lump-sum investment strategies beat common cost averaging investment strategies two-thirds of the time, according to historical and simulated market data." An earlier Vanguard paper was titled "Dollar-Cost Averaging Just Means Taking Risk Later."

Source: Vanguard, "Cost averaging: Invest now or temporarily hold your cash?", Megan Finlay and Josef Zorn, February 2023

How we tested it

Someone gets $10,000 on the first trading day of a month. Plan A, lump sum: all of it goes into the S&P 500 with dividends reinvested (the SPY index fund) that day.
Plan B, dollar-cost averaging: one twelfth that day, then the rest on the first trading day of each following month, 12 purchases in all. The cash waiting its turn earns 3-month Treasury bill (T-bill) interest, so Plan B gets a fair shake. We also ran a 6-month version, and a 3-month version as a check.
Every start month from January 1996 to December 2025, checked 1, 5 and 10 years later with real prices through October 2026: 358 starts for 1 year, 310 for 5 years, 250 for 10 years.
We also looked at each plan once a month during the first year, to see how often it showed a scary loss.
No fees and no taxes, the best case for both. The test assumes the spread-out investor really makes every purchase, even while the market is falling.

Lump sum vs dollar cost averaging: which wins more often?

The lump sum, about 3 times out of 4. After 1 year it beat a 12-month spread in 272 of 358 start months (76%); after 5 years in 234 of 310 (75%); after 10 years in 182 of 250 (73%).

The average lead for the lump sum was $439 per $10,000 after 1 year, $591 after 5 years and $780 after 10 years. A 6-month spread cost about half as much ($349 after 10 years), and the lump sum beat it about 2 times out of 3. The longer the wait, the more often the lump sum won: 64% against a 3-month spread, 68% against 6 months, 76% against 12 months.

What if the market crashes right after you invest a lump sum?

That's the case this advice is built on, and it's real. All in on October 1, 2007, days before the S&P 500 peaked on October 9, 2007: $7,682 a year later, against $8,590 spread over 12 months. Ten years later: $20,162 against $22,547. Spreading won by $2,385, and both more than doubled.

The worst start for the lump sum in the whole test was September 2008: behind by $3,053 after 1 year and $10,582 after 10. The dot-com crash helped much less. Start in January 2000 and spreading out was ahead by only $285 after a year, because the S&P 500 fell for about two and a half years, from March 24, 2000 to October 9, 2002, so a 12-month plan was still buying near the top.

Can dollar cost averaging lose more than a lump sum?

Yes, and it's the case nobody mentions. Start in March 2009, the month of the market's bottom: the lump sum was worth $16,217 a year later, the 12-month spread $11,833. Spreading out was $4,384 behind after 1 year and $13,172 behind after 10 years.

That is a bigger miss than the lump sum's worst 10-year case ($10,582 behind, September 2008), yet the advice rarely mentions it.

Is dollar cost averaging less risky?

For your nerves, yes. Checking once a month in the first year, the lump sum showed a loss of 20% or more in 37 of 358 start months, about 1 in 10. The 12-month plan: 9, about 1 in 40. That matters for anyone a big early drop would push into selling. Vanguard's paper agrees that "investors with higher loss aversion would be better off with CA" (CA means cost averaging).

For your money, no. After 1 year, both plans were below $10,000 in exactly the same number of start months: 72 of 358. And the real gap is invested versus not invested: leaving the money in T-bills for 10 years averaged $11,800, against $24,840 for the lump sum and $24,059 for the 12-month spread.

The scoreboard: $10,000 all at once vs spread out, every start month since 1996
Spread over	Checked after	Lump sum won (start months)	Average lump sum	Average lump sum lead
12 months	1 year	272 of 358 (75.98%)	$11,160	+$439
12 months	5 years	234 of 310 (75.48%)	$15,706	+$591
12 months	10 years	182 of 250 (72.8%)	$24,840	+$780
6 months	1 year	245 of 358 (68.44%)	$11,160	+$205
6 months	5 years	214 of 310 (69.03%)	$15,706	+$276
6 months	10 years	167 of 250 (66.8%)	$24,840	+$349
3 months (check)	1 year	230 of 358 (64.25%)	$11,160	+$83
3 months (check)	10 years	154 of 250 (61.6%)	$24,840	+$140

Per $10,000. S&P 500 with dividends (SPY); waiting cash earns T-bill interest; no fees or taxes. Start months January 1996 to December 2025.

The verdict

PARTLY TRUE. Spreading it out is safer for your nerves in year one, not safer for your money. It lost to the lump sum about 3 times out of 4, it was below $10,000 after a year just as often (72 of 358 start months), and the 12-month plan cost $780 per $10,000 on average over 10 years. If a big early drop would push someone into selling, spreading over a few months and sticking to it is the middle path in this test: 6 months cost about half as much as 12.

What this test leaves out

One country and one 30-year stretch (1996 to October 2026). Start months overlap, so they are not independent tests.
No fees or taxes. Real investors may pay trading costs on 12 purchases, though most brokers charge $0 for ETFs (exchange-traded funds) today.
The test assumes the spread-out investor really makes every purchase, including while the market is falling.
100% stocks, no bonds. Purchases on the first trading day of each month, at the close.
Vanguard tested differently (mainly a 3-month spread, judged after one year), so its two-thirds figure and our numbers are not the same measure.

Data: S&P 500 with dividends (SPY) and 13-week T-bills, 1996 to October 2026; waiting cash earns T-bill interest; no fees, no taxes. Every number on this page comes from the test results.

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Questions people ask

Is lump sum or dollar cost averaging better?: In this test, the lump sum won about 3 times out of 4. Investing $10,000 all at once beat spreading it over 12 months in 272 of 358 start months (76%) after 1 year, and in 182 of 250 (73%) after 10 years.
How much does dollar cost averaging cost?: On average, spreading $10,000 over 12 months left $439 less after 1 year and $780 less after 10 years. On a $100,000 rollover that is $7,800. A 6-month spread cost about half as much.
What if I invest a lump sum right before a crash?: All in on October 1, 2007, just before the peak: $7,682 a year later, against $8,590 spread over 12 months. Ten years later it was $20,162 against $22,547: spreading out won, and both more than doubled.
Does dollar cost averaging reduce risk?: It reduces scary moments, not losses. In the first year the lump sum showed a 20%+ loss in 37 of 358 start months and the 12-month plan in 9, but after a year both were below $10,000 in exactly 72 start months.
Is dollar cost averaging better when cash pays 4%?: Not in this test. In start months when T-bills paid 4% or more, the lump sum still won 80.67% of the 1-year comparisons and 74.12% of the 10-year ones.
Why does lump sum investing usually win?: Because stocks usually beat cash: the S&P 500 beat T-bills over the next 12 months in 78.77% of the 358 start months. Money waiting its turn misses those gains, and once the last purchase is made both plans own the same fund.

What's in the video

0:00 Intro
0:23 The claim
1:42 How we tested it
2:32 The scoreboard
3:25 The scary cases
4:50 The case nobody mentions
5:18 Peace of mind
6:21 Why it happened
7:13 What actually works
8:12 The verdict

Read the script of the video

The words JJ read on camera for this test. The final video may differ slightly.

You've probably been told: if you get a big chunk of money, don't put it all in at once. Spread it out to be safe. We tested that on every month for 30 years, and spreading it out over a year lost about 3 times out of 4. But in the worst months, it saved people real money. Today you'll see both.

I am JJ, and this is the 10K Test. Every week I take a piece of money advice everybody repeats and test it against real market history. Not opinions. What the money actually did.

Say you get a lump of money. An inheritance, or a 401(k) you're rolling over when you retire. Everything today is per $10,000; if yours is 100,000, multiply by 10.

The advice you've probably heard: don't put it all in at once. Dollar-cost average. Put in a little every month for a year, so if the market crashes right after you start, you don't take the whole hit.

It makes sense. Nobody wants to invest their life savings the day before a crash.

But Vanguard, the big index-fund company, says the opposite. In a research paper from February 2023, they wrote: "Lump-sum investment strategies beat common cost averaging investment strategies two-thirds of the time."

An earlier Vanguard paper had an even blunter title: "Dollar-Cost Averaging Just Means Taking Risk Later."

Common sense against Vanguard's research. This channel settles arguments like that with 30 years of market math. If that helps you, subscribe.

So who's right? We tested it.

Here's exactly what we did, so you can check it.

Someone gets $10,000 on the first trading day of a month. Plan A: they put all of it into the S&P 500 that day. We used SPY, the S&P 500 index fund, with dividends reinvested.

Plan B: they put in one twelfth that day, and another twelfth at the start of each of the next 11 months. The money waiting its turn earns 3-month Treasury bill interest, so Plan B gets a fair shake. We also ran a 6-month version.

Then we did it again for every month from January 1996 to the end of 2025, and checked both plans 1, 5 and 10 years later, with real prices through October 2026.

No fees, no taxes, so it's the best case for both. And it's one 30-year stretch of one country's stock market.

Each bar is one start month: green, the lump sum won; red, spreading it out won.

After 1 year, the lump sum won in 272 of 358 start months. 76%. After 5 years, 75%. After 10 years, 73%. About 3 times out of 4, every way we looked at it.

The lump sum came out ahead by $439 on average after 1 year, and $780 after 10 years. On a $100,000 rollover, that's $7,800.

The 6-month plan did better, because the money waited less. The lump sum beat it about 2 times out of 3, and the average gap after 10 years was $349.

Look where the red bars bunch up: most of 2000 to mid-2002, and May 2007 through November 2008. Right before the two big crashes.

Now the nightmare.

October 2007. The S&P 500 hit its peak that month, right before the financial crisis.

All 10,000 in on October first: 1 year later, $7,682. Spread over the year: 8,590. Spreading it out saved you about $900.

And it got worse. By March 2009, the lump sum was down to about $4,700. The spread-out plan: about 5,300. Both lost about half. That crash lasted longer than 12 months, so spreading it out couldn't dodge it.

10 years later, October 2017: lump sum, $20,162. Spread out, 22,547. Spreading won by about $2,400. And notice: even starting at the very worst time, both plans more than doubled.

The worst start for the lump sum in our whole test: September 2008, in the middle of the crisis. Spreading out was ahead by $3,053 after a year, and by 10,582 after 10 years. That's the case this advice is built on.

The dot-com crash? Start in January 2000, and spreading it out was ahead by only $285 after a year. That crash took about 2 and a half years from top to bottom, so a 12-month plan was still buying near the top. 10 years later, both plans were still under $10,000.

Now the part people leave out: it works the other way too.

March 2009, the month the market hit bottom. Lump sum, 1 year later: $16,217. Spread out: 11,833. Spreading it out left you $4,384 behind. After 10 years, $13,172 behind.

So the worst miss for spreading it out was bigger than the worst miss for the lump sum. You just don't hear about it, because nobody feels the pain of money they almost made.

Now the part that isn't on a spreadsheet: how it feels.

We looked at each account once a month during the first year. With the lump sum, there was at least 1 month where you were down 20% or more in 37 of the 358 start months. About 1 in 10. With the 12-month plan, it happened 9 times. About 1 in 40. Down 10% or more: lump sum about 1 in 4, spread out about 1 in 8.

That matters. Put your whole rollover in, see a 20% loss on your statement a few months later, and some people panic and sell. Selling at the bottom is what turns a bad year into a permanent loss. Vanguard agrees: "investors with higher loss aversion would be better off with CA." That's cost averaging.

But here's what surprised me. After 1 year, how often was each plan worth less than the 10,000 you started with? Lump sum: 72 start months. Spread out: also 72. Exactly the same. Spreading it out made the ride smoother. It did not make you less likely to be down after a year.

So why does the lump sum usually win? Two reasons.

One: stocks usually beat cash. In our data, the S&P 500 beat Treasury bills over the next 12 months in about 79% of start months. So the longer you wait, the worse it gets: the lump sum beat a 3-month spread 64% of the time, 6 months 68%, 12 months 76.

Two, and I didn't expect this: the race is decided in the first year. Once the spread-out plan makes its last purchase, both people own the exact same fund. From then on, whoever's ahead stays ahead by the same percentage, forever. Only what happens while you're waiting counts.

"But JJ, T-bills pay about 4% right now." Fair. In the months when T-bills paid 4% or more, the lump sum still won about 81% of the time after 1 year.

So what works? Three things from the same data.

One: if you can stomach the ride, put it in. It won about 3 times out of 4.

Two: if you know a big early drop would make you sell, spread it out, but keep it short, and set up every purchase in advance. 6 months cost less than half as much as 12. And our test assumed you keep buying every month, even while the market is falling. If you'd stop, the plan falls apart.

Three, the big one: don't let "spreading it out" turn into "waiting for the right time." If you'd left the money in T-bills for 10 years, our average was $11,800. Lump sum: 24,840. Spread out over a year: 24,059.

The real gap isn't lump sum versus spreading it out. It's invested versus not invested.

And if a 20% drop would wreck your sleep however you got in, the fix isn't timing. It's how much of your money is in stocks. That's a future episode.

So: "Don't put it all in at once. Dollar-cost average to be safe." Verdict: PARTLY TRUE.

It's safer for your nerves: in the first year, far fewer scary statements. It's not safer for your money. It lost to the lump sum about 3 times out of 4, it was below where you started after a year just as often, and on average it cost about $780 per 10,000 over 10 years.

If a big early drop would make you sell, spread it over a few months and stick to it. If it wouldn't, the data says put it in.

Every week I send a free email with the full numbers behind each test: the tables, the charts, and what we're testing next. Free weekly email at 10Ktest.com.

And tell me in the comments what money advice you want tested next.

This video is for education and entertainment, not personal financial advice. Your situation is different; talk to a professional before you invest a lump sum or roll over a retirement account.

Disclosure: I don't own an S&P 500 index fund or any Vanguard funds. I do own some individual stocks, including Apple, which is part of the S&P 500. Nobody paid for this video.

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Education and entertainment only. Not personal financial advice. Your situation is different; talk to a professional before you invest a lump sum or roll over a retirement account. Disclosure: I don't own an S&P 500 index fund or any Vanguard funds. I do own some individual stocks, including Apple, which is part of the S&P 500. Nobody paid for this video.