Vanguard's February 2023 study found that investing a lump sum at once beat cost averaging in 68% of one-year periods, roughly two-thirds of the time, across global markets, and that cost averaging still beat holding cash 69% of the time [1]. The 2026 market followed the same pattern. In DataPorium's data, $120,000 put into the S&P 500 on December 31, 2025 was worth $134,817 on October 19, 2026, while ten monthly installments of $12,000 were worth $129,674, including $1,666 of interest at the 3-month Treasury yield on the cash still waiting to be invested [2][3].
What did Vanguard's 2023 cost averaging study find?
Vanguard researchers Megan Finlay and Josef Zorn compared the two methods in the United States, the United Kingdom, Australia, Canada and the euro area, using historical data and simulated return paths [1]. Their headline result: a lump sum did better than cost averaging roughly two-thirds of the time, 68% in the global market example, when wealth was compared after one year [1]. Cost averaging (also called dollar-cost averaging) means investing a fixed amount at regular intervals instead of all at once.
The reason is the return on risk. Between 1976 and 2022, U.S. stocks beat 3-month Treasury bills in 76% of periods and U.S. bonds beat bills in 68% [1]. Money waiting in cash gives up that extra return, and cost averaging is, by design, a plan to hold cash for a while.
The study adds that cost averaging is not a mistake compared with doing nothing. It beat staying in cash 69% of the time [1]. The usual order across history is therefore: lump sum first, cost averaging second, cash last.
When does cost averaging win?
Cost averaging wins when prices fall during the averaging window. Vanguard's results show the lump sum ahead in all but the worst outcomes; in the lowest range of one-year returns, averaging left investors with more money because it bought later at lower prices [1]. The method works like insurance against a bad first year, paid for with a lower expected return.
Did a lump sum beat dollar-cost averaging in 2026?
Yes, by a clear margin. The S&P 500 closed 2025 at 6,845.50. It fell 9.1% from its January 27 close of 6,978.60 to a low of 6,343.72 on March 30, 2026, then rallied to 7,690.73 on October 19, 2026, up 12.3% for the year [2]. That spring drop is the kind of event averaging is meant to soften, but the rebound came quickly.
The test below uses month-end closing prices. The lump sum buys on December 31, 2025. The averaging plans split the same $120,000 into equal monthly purchases, and the uninvested cash earns the 3-month Treasury yield in effect at the start of each month [2][3]:
| Purchase date | S&P 500 close | Versus the December 31 price | 3-month Treasury yield |
|---|---|---|---|
| December 31, 2025 | 6,845.50 | 0.0% | 3.67% |
| January 30, 2026 | 6,939.03 | +1.4% | 3.67% |
| February 27, 2026 | 6,878.88 | +0.5% | 3.67% |
| March 31, 2026 | 6,528.52 | -4.6% | 3.70% |
| April 30, 2026 | 7,209.01 | +5.3% | 3.68% |
| May 29, 2026 | 7,580.06 | +10.7% | 3.69% |
| June 30, 2026 | 7,499.36 | +9.6% | 3.87% |
| July 31, 2026 | 7,489.72 | +9.4% | 3.83% |
| August 31, 2026 | 7,686.14 | +12.3% | 3.91% |
| September 30, 2026 | 7,651.54 | +11.8% | 4.20% |
Source: DataPorium Stock Market, S&P 500 daily closes, and DataPorium Interest Rates, 3-month Treasury par yields on the same dates [2][3].
The results, valued at the October 19, 2026 close:
| Strategy, $120,000 in total | Purchases | Value, S&P 500 prices only | Value, VOO with dividends reinvested |
|---|---|---|---|
| Lump sum | December 31, 2025 | $134,817 (+12.3%) | $136,004 (+13.3%) |
| Seven installments of $17,143 (the original plan) | December 31 to June 30 | $131,985 (+10.0%) | $132,800 (+10.7%) |
| Ten installments of $12,000 | December 31 to September 30 | $129,674 (+8.1%) | $130,290 (+8.6%) |
Source: DataPorium Stock Market, S&P 500 index closes and Vanguard S&P 500 ETF (VOO) closes and dividends; DataPorium Interest Rates, 3-month Treasury yields [2][3]. Values include interest on idle cash: $1,103 for the seven-installment plan and $1,666 for the ten-installment plan. The VOO column reinvests the dividends paid on March 27, June 26 and September 28, 2026 at that day's close. Taxes and trading costs are ignored.
Our analysis of DataPorium's S&P 500 price data shows that eight of the ten monthly purchases from December 2025 to September 2026 were made above the lump-sum entry price of 6,845.50, so the averaging plan paid an average of 7,209.60, 5.3% more per unit of the index.
The averaging plan bought its cheapest installment on March 31 at 6,528.52, 4.6% below the December 31 price [2]. That one purchase could not offset the eight made at higher prices after the rebound. With ten installments, the lump sum finished $5,143 ahead on prices alone and $5,714 ahead with VOO dividends reinvested [2][3]. Had the March drop lasted through the summer, the order would have reversed; that is the trade an averaging investor accepts.
The same data cover the original seven-month test, which ended on July 21, 2026. On that date the lump sum was worth $131,635 and the seven installments $127,793 in shares, before interest, matching the figures first published here [2].
How much did the waiting cash earn in 2026?
A common argument for averaging in 2026 is that idle cash earned a solid yield. The 3-month Treasury yield was 3.67% on December 31, 2025, 4.20% on September 30, 2026 and 4.26% on October 20, 2026 [3]. Short rates rose after the Federal Reserve raised its target range by 0.25 point to 3.75% to 4.00% on September 16, 2026, its first change of the year [3].
Even so, the interest was small next to the stock gain. The ten-installment plan earned $1,666 of interest over nine months on a falling cash balance, while the lump sum's shares gained $14,817 [2][3]. The cash yield narrowed the gap but did not close it, in line with Vanguard's finding that cash is the weakest of the three choices in most periods [1].
Why is the choice really about behavior?
Most investors never face this decision with a large sum. They invest from each paycheck, which is cost averaging by necessity. The lump-sum question applies to inheritances, bonuses, business sales and retirement rollovers. For those cases, Vanguard's evidence favors investing at once when the portfolio already matches the investor's risk tolerance. Where the real alternative is holding cash indefinitely out of fear of a drop, Vanguard describes a scheduled averaging plan as a second best, because it gets the money invested at all [1].
- The target mix of stocks and bonds comes first; the averaging question is only about how fast to reach it.
- Short windows cost less. Vanguard's comparison is over one year, and each extra month in cash gives up part of the expected return [1].
- Automatic installments remove the temptation to stop after a rally or pause after a decline.
- Entry prices are easy to track. DataPorium's stock market pages show daily S&P 500 history, and its ETF pages show fund prices and dividends [2].
The fair counterpoint is valuation. When stock prices are high relative to earnings, some analysts argue the expected extra return from stocks is thinner and the cost of waiting is lower. Vanguard's results are averages across all historical starting points, so they do not settle that debate; the study presents averaging as a way to reduce regret, not to raise returns [1].
Key takeaways
- Vanguard's 2023 study found a lump sum beat cost averaging in 68% of one-year periods, and cost averaging beat cash 69% of the time [1].
- In 2026, $120,000 put into the S&P 500 on December 31, 2025 was worth $134,817 on October 19, versus $129,674 for ten monthly installments including interest [2][3].
- Eight of the ten installments were bought above the 6,845.50 lump-sum entry price; the cheapest, on March 31, was 4.6% below it [2].
- Idle cash earned $1,666 at 3-month Treasury yields of 3.67% to 4.20%, far less than the $14,817 gain on the lump sum's shares [2][3].
- With VOO dividends reinvested, the lump sum returned 13.3% and the ten-month plan 8.6% [2].
Frequently asked questions
What did Vanguard's 2023 study find about lump-sum investing?
Vanguard found that a lump sum beat cost averaging roughly two-thirds of the time, 68% of one-year periods in its global example, and that both beat holding cash in most periods [1].
Did dollar-cost averaging beat a lump sum in 2026?
No. A $120,000 lump sum in the S&P 500 on December 31, 2025 was worth $134,817 on October 19, 2026, $5,143 more than ten monthly installments including interest on the waiting cash [2][3].
When does dollar-cost averaging win?
When prices fall during the averaging window. In Vanguard's worst one-year outcomes, averaging left investors with more wealth because later purchases were made at lower prices [1].
How long should a dollar-cost averaging plan last?
Vanguard's analysis compares wealth after one year, and longer plans keep more money in cash, which trailed U.S. stocks in 76% of periods from 1976 to 2022 [1].