Dollar-cost averaging over 3, 6, 12 or 24 months: what the spreading period changes

By DecisionSheet · Updated September 26, 2026 · 2026 tax figures

Dollar-cost averaging (DCA) a windfall means moving it into the market in equal monthly amounts instead of all at once. The companion guide, You got a windfall: invest it all now or spread it out?, shows which side ends ahead in DecisionSheet's model on four market paths and what the cash yield does. This guide holds the path fixed and changes the one choice a DCA plan adds: how many months to spread the money over.

The case is the calculator's default: $60,000, a 4.5% yield on the cash still waiting, and both sides compared after 36 months. The DCA period is set to 3, 6, 12 and 24 months, first on the average path (8.5% a year), then on the bear path (-18% a year). The longer the period, the larger the gap, in whichever direction the path points.

How the model spreads the money

The DCA side starts with the whole amount in cash. Each month the cash earns its yield, anything already invested earns the path's return, and then one tranche, the amount divided by the number of months, moves into the market. The first tranche is invested at the end of month 1 and the last at the end of the final month of the period.

So the first tranche spends one month in cash, the second two, and the last one the whole period. The average dollar waits (months + 1) ÷ 2:

The last column is a detail of the model: the tranche is fixed at the start, so the interest the waiting cash earns is never invested. It stays in cash, still earning the yield, to the end of the comparison. A longer period leaves more of it.

The lump-sum side does not depend on the period at all. It ends at $76,637 on the average path and $33,082 on the bear path whichever DCA period is chosen.

The average path

On the average path the market returns more than the cash yield, so every month a dollar waits costs it the difference between the two rates. The lump sum ends ahead at every period, and the lead grows with the period:

Open each: 3 months · 6 months · 12 months · 24 months. The four differ only in the DCA period.

The last column divides the gap by the average wait from the first table. It stays close to level across the four periods, so in this model the gap is close to proportional to how long the average dollar sits in cash. Going from 12 to 24 months multiplies the lump sum's lead by 1.9.

The bear path

The bear path falls -18% a year for all 36 months. Here the cash yield beats the market, so every month a dollar waits spares it part of the fall, and DCA ends ahead at every period:

Open each: 3 months · 6 months · 12 months · 24 months. Each differs from the average-path scenario of the same length only in the path.

With a 24-month plan the DCA total rises for the first months, to $60,615 in month 5, while most of it is still in cash, and then falls with the market. From 12 to 24 months the DCA side's lead multiplies by 2.0. At every period the gap on the bear path is larger than on the average path.

Across every period the calculator's slider offers, 3 to 36 months, a longer period gives a larger gap on both paths. On every scenario here, the side ahead at month 36 is ahead in every month before it, and every gap is larger than the $10 band inside which the calculator calls a tie.

What the period does and does not change

In this model, the period scales the result; it does not choose the winner. The side that finishes ahead is set by whether the path's return is above or below the cash yield, as the companion guide shows. A longer period means more dollar-months in cash, which widens a lump-sum lead on a path above the cash yield and widens a DCA lead on a path below it.

Research on historical returns points the same way on the first half. Vanguard's 2023 paper Cost averaging: Invest now or temporarily hold your cash? found that in rolling one-year periods of the U.S. market (Russell 3000, 1979–2022), investing at once beat a three-month split 66.4% of the time and a six-month split 73.7% of the time, and concludes that the longer it takes to fully invest cash, the greater the opportunity cost. Those are historical frequencies from the paper, not outputs of this model, which runs one fixed path per scenario.

The paths are stylized, not history: each is one constant annual return applied identically every month. A real market moves up and down within a DCA period, so a tranche can buy after a drop or before one. The model cannot show that, and the returns are assumptions, not forecasts.

Assumptions and limits

• One market path per scenario, at a constant rate, with no volatility or recovery after the bear path.
• The market return and cash yield are inputs, not predictions.
• A fixed tranche each month; interest earned by waiting cash stays in cash to the horizon.
• All periods here end before the 36-month comparison, so each plan is fully deployed when the two sides are compared.
• No taxes on gains or interest, and no fees.
• The model compares ending values only; it does not measure how far either side fell along the way.

Method and sources

The model is calculateLumpSumVsDca in the lump sum vs. DCA calculator, run on the calculator's defaults with the DCA period and path changed as stated. Each annual rate is converted to a monthly rate geometrically, and both sides are simulated month by month. The data file checks every ordering stated above against the model.

• Investor.gov, Dollar Cost Averaging: investing money in equal portions, at regular intervals, regardless of the ups and downs in the market.
• Vanguard, Cost averaging: Invest now or temporarily hold your cash? (Finlay and Zorn, 2023), Figure 6: U.S. hit ratios for lump sum beating cost averaging of 66.4% for a three-month split and 73.7% for a six-month split; and "the longer the CA horizon—the time it takes to fully invest cash—the greater the opportunity cost incurred."

Open this scenario in the calculator

All figures on this page come from the Lump Sum vs. DCA calculator. Change any input there and the numbers update.