Nobody Gains from Dollar Cost Averaging Analytical, Numerical and Empirical Results
DOI:
https://doi.org/10.1016/1057-0810(92)90015-5Abstract
Dollar Cost Avemging is an investment system that is widely advocated by brokerage firms and mutual funds. In its best known form, an investor seeking to put a lump sum into risky assets is counseled to invest the money over a period of time in equal installments in or&r to avoid the devastating effect of a marketfall immediately afkr a single, lump-sum investment. Using graphical analysis, historical stock market returns, and Monte Carlo simulations, this article demonstmtes that no such benefit accrues to a Dollar Cost Averaging Stmtegy. Two alternative strategies, optimal rebalancing and buy and hold achieve better performance in all three analyses.
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