DCA vs lump sum
You have a sum to invest: all now, or a little at a time? The calculator compares the lump sum, all invested on day one, with a plan that spreads the same capital over monthly instalments (dollar-cost averaging, PAC in Italian), keeping the rest in cash.
Lump sum final value
€ 82,350
Plan final value
€ 80,163
Difference
€ 2,188
2.7% in favour of Lump sum
Value over time
Summary
| Item | Lump sum | Plan (12 months) |
|---|---|---|
| Capital | € 50,000 | € 50,000 |
| Fully invested after | 0 months | 12 months |
| Final value | € 82,350 | € 80,163 |
| Total return | 64.7% | 60.3% |
Estimates for information only, not financial or tax advice: the results depend on the assumptions entered, and past returns do not guarantee future ones.
How the comparison works
In the lump sum all the capital grows at the assumed return from the first month. In the plan the capital is split into equal instalments, invested one a month; the part not yet invested stays in cash with no return.
With a constant positive return the lump sum always comes out ahead: every euro stays invested longer. It is a result of the model, not a forecast.
What the model does not see
In reality returns are not constant. Spreading purchases lowers the risk of investing everything just before a fall, at the price of staying partly out of the market. A 2012 Vanguard study of the US, UK and Australian markets found that the lump sum did better in about two cases out of three.
A monthly plan remains the natural choice when the capital is not there at once and comes each month from your salary: then there is no alternative to compare.
Frequently asked questions
Why does the lump sum always win in the calculator?
Because the assumed return is constant and positive: under those conditions money invested earlier grows more. With negative returns the plan would come out ahead. The comparison shows the cost of staying in cash, not market risk.
Over how many months should a plan be spread?
The calculator does not say: it shows how the result changes with 6, 12, 18, 24 or 36 months under the assumptions you enter.
Does the cash waiting to be invested earn anything?
Not in the calculation: the part not invested stays at zero. If you park it in a deposit account or short-term bonds, the gap between the two narrows.
Follow your plan over time
In PortFolk each savings plan has its instalments, the proposed execution split across the instruments and the projection toward its target, next to the actual return of the trades made.
The demo is a sample portfolio, already filled in: it opens without signing up. The Free plan asks for no card.
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