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Dollar-Cost Averaging
Dollar-cost averaging allows an investor to consider the performance of investments made at regular intervals compared with an investment made in a lump sum. This example compares the potential current value of two portfolios valued at $12,000 on April 1, 2015. The lump-sum portfolio was fully allocated to stocks whose performance mirrored a reference stock index on that date, while the dollar-cost averaging portfolio was allocated first to a portfolio that mirrored the performance of 3-month Treasury bills, then gradually reallocated to the reference equity portfolio at the pace of $200 per month.
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The Effect of Missing Top Performance Periods for Stocks, Past 30 Years
This chart shows how returns might have been affected by missing the 12 top-performing months during 10-, 20-, and 30-year periods, assuming that investment performance mirrored the performance of the S&P 500 index. For example, for the 10-year period from April 2015 to March 2025, missing the top 12 months could have reduced an investor's return by 10 percentage points annually. Investors who remained invested for the entire period might have achieved higher returns for each holding period than those who tried to time the market and missed.
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Missing Top-Performing Months in the Stock Market
This table illustrates the potential pitfalls of market timing. The table shows the effects of missing the strongest performing months over long holding periods, assuming that investment performance mirrored the performance of the S&P 500 index.
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The Effects of Missing Top Performance Periods for Stocks (20 Years)
This chart shows how returns could have been affected by missing the top-performing months over the past 20 years assuming that investment returns mirrored the performance of the S&P 500 index. For example, missing the top 10 months might have reduced an investor's return by 5 percentage points annually. Investors who remained invested for the entire period might have achieved higher returns for each holding period than those who tried to time the market and missed.
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The Effects of Missing Top Performance Days for Stocks, Past 20 Years
This chart shows how returns might have been affected by missing the top-performing days in the stock market during the past 20 years, assuming that investment returns mirrored the performance of the S&P 500 index. For example, missing just the top 10 days could have cost an investor more than $19,000 over the 20-year period, based on a $10,000 initial investment. Investors who remained invested for the entire period could have achieved higher returns for each holding period than those who tried to time the market and missed.
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