DCA vs Lump Sum — rolling-window backtest

Rather than pick a winner, this tool rolls the choice across every start year since 1928 on S&P 500 total return and reports how often each approach ended ahead, the 5th-percentile downside, and the Lump minus DCA spread as a percent of capital. Because markets vary, the honest answer is a range across start years, not one date. Bars right of the tie line are years lump-sum led; bars left are years DCA led.

Dollar-cost averaging spreads a windfall into equal tranches invested at the start of each year instead of deploying it all immediately. In this backtest you choose a span of 2, 3, 4, 5, or 10 years, with 3 the default, and the cash still waiting to be invested earns the 3-month T-bill. Both strategies are compared at the end of the deployment window, where each is fully invested and compounds identically after that.

While a dollar-cost-averaging plan holds money back, that undeployed cash earns the 3-month T-bill rather than the S&P 500 total return, and the tool lets you switch that credit on or off, where off treats it as 0 percent. Whether investing all at once ends ahead depends on how equities performed against the T-bill over each window since 1928, which is why the result is shown as a distribution rather than a verdict.

Results are net of fees, tax, and inflation. A taxable account applies 15 percent long-term capital-gains tax at liquidation, while the IRA or Roth setting applies none; annual dividend tax is not modeled in this version. An annual fee in basis points is dragged off the invested market return. Real mode deflates each window by December CPI-U over its span, and turning dividend reinvestment off subtracts an approximate 1.9 percent yield.