Buy the Dip vs. Dollar Cost Averaging. What is better?
July 20, 2024
8 min read
Buy the Dip vs. Dollar Cost Averaging: Even God Can't Beat a Savings Plan
The last article about market timing you'll ever need to read. Backed by 100 years of data.
Imagine you had a crystal ball. You knew exactly when every crash was coming. You always bought at the absolute bottom. Perfect timing. Every single time.
Would that beat a simple, boring monthly savings plan?
The answer — backed by 100 years of U.S. market data — is: no. In roughly 70% of all rolling 40-year periods, even an omniscient "Buy the Dip" investor loses to someone who just invests the same amount every month, ignoring the market entirely.
This finding comes from Nick Maggiulli, author of Just Keep Buying, who ran the numbers and published them in his now-famous article "Even God Couldn't Beat Dollar-Cost Averaging." We'll walk through exactly why — and what it means for how you should invest your own money.
70%
Of 40-year periods where DCA beats perfect timing
97%
When dip buyer is just 2 months off
0
Real humans with perfect timing
The experiment: God vs. savings plan
Maggiulli's thought experiment is elegant. Two investors, same starting point, same monthly amount, 40 years of U.S. stock market history. The only difference: when they buy.
Strategy 1: DCA
Invest USD 100 every month. No matter what. No matter where the market is. For 40 years straight.
Zero timing required
Strategy 2: Buy the Dip
Save USD 100/month in cash. Only buy when the market is below its all-time high. And — here's the twist — you're omniscient. You always buy at the absolute bottom.
Requires divine foresight
The hypothesis seems obvious: an all-knowing dip buyer must do better. They always buy at the bottom, after all. How could they possibly lose to someone buying at random prices every month?
The surprising result
In roughly 70% of rolling 40-year periods between 1920 and 2018, the simple savings plan beat the omniscient Buy-the-Dip strategy. Even God, with perfect foresight, couldn't consistently beat just showing up every month.
Why does perfect timing lose?
It sounds impossible. How can always buying at the bottom lose to buying at random prices? There are three clear reasons.
1. Dips are rare — and the dip buyer's money sleeps
Major crashes — the only moments when Buy the Dip has a real advantage — are rare events. The market spends most of its time at or near all-time highs. Between big crashes, years can pass with no meaningful dip at all. During that time, what does the dip buyer do? They wait. Their cash sits in a savings account earning 1–2%, while the DCA investor's money is already compounding at 7%.
The cash drag trap
Imagine saving CHF 1'000/month but waiting 3 years for a dip. Your cash savings at ~1% interest grow to roughly CHF 36'500. Meanwhile, the DCA investor invested the same monthly amount in the market — which at 7% grew to roughly CHF 39'900. You start your perfect dip purchase already CHF 3'400 behind — and the dip has to dig you out of that hole first before you even start winning.
2. Missed compounding costs more than any discount
Compounding rewards time in the market, not timing. Every month your money is invested generates returns, and those returns themselves generate returns. Those who wait for a dip lose this effect — and no entry point, however perfect, can fully compensate for the lost years.
A simple example makes the point. Compare two investors over 30 years at a 7% annual return:
| Scenario | End value after 30 years |
|---|---|
| Savings plan: CHF 500/mo, starts immediately, 30 years | CHF 610'000 |
| Waits 3 years for a dip, then CHF 500/mo for 27 years | CHF 479'000 |
| Cost of those 3 years of waiting | –CHF 131'000 |
7% annual return, monthly compounding. Simplified scenario assumes the waiting investor doesn't deploy their accumulated cash at the dip — the point is to isolate the cost of missed time in the market.
Three years of waiting costs CHF 131'000 in missed compounding over the full horizon. Even if the dip buyer eventually deploys their accumulated cash at a perfect bottom, catching up to that gap is extremely difficult — because the DCA investor has been compounding uninterrupted for 30 years, while the dip buyer is still playing catch-up in the back half.
3. Miss by two months — and the advantage disappears
Even with perfect timing, Buy the Dip only wins 30% of the time. But what happens if your timing isn't perfect — but just two months off?
Maggiulli's data is brutal: if you miss the absolute bottom by just 2 months, your probability of beating the savings plan drops from 30% to 3%. Flip the question around and the result is the same: DCA beats a dip buyer who is 2 months off in 97% of cases.
Zero margin for error
Perfect timing: 30% chance of beating DCA.
2 months off: 3% chance.
6 months off: effectively 0%.
And here's the kicker: nobody has perfect timing. Not you. Not your bank advisor. Not CNBC. Not the finance Twitter account with 500k followers. Perfect timing is a theoretical construct that doesn't exist in real life — which means the savings plan wins even more decisively than the 70% headline suggests.
Lump sum vs. savings plan vs. Buy the Dip
The complete picture reveals three options, not two. And the ranking is clearer than most people think:
| Strategy | Return (historical) | Timing needed? | For whom? |
|---|---|---|---|
| Lump sum | Highest (wins ~67%) | No | Those with a large sum + nerves of steel |
| Savings plan (DCA) | Very high (beats BTD 70%) | No | 95% of all investors |
| Buy the Dip | Lowest (even with perfect timing) | Yes — perfect | A theoretical thought experiment |
Lump sum investing is statistically the strongest strategy — because maximum time in the market means maximum compounding. Vanguard research shows it beats DCA in roughly two-thirds of cases. The catch: you need a large sum today, and the nerve to hold through an immediate crash without selling. Most people don't have both.
The savings plan is the second-best strategy — and by far the best for normal people with monthly salaries. It requires no timing, no large starting sum, and no iron nerves. It beats Buy the Dip 70% of the time even when the dip buyer has perfect foresight, and 97% of the time when the dip buyer is two months off.
Buy the Dip is the worst of the three — even with a crystal ball. Which makes you wonder why anyone still talks about it.
The best time to invest was 20 years ago. The second best is today. The worst: waiting for the perfect dip that never comes.
What this means for you, concretely
If you invest monthly (most of us)
Savings plan. Automatic. Standing order 1–2 days after payday. Done. You'll beat 70% of theoretically perfect dip buyers — and 100% of real ones who never actually time the dip correctly. Don't overthink it.
If you have a large lump sum
Statistically optimal: invest everything immediately. Psychologically optimal for most: 50% immediately, 50% spread over 6–12 months. Not optimal: waiting for a dip that may take 5 years to arrive. Now you understand why.
If you're afraid of buying "too high"
Remember: the market is usually at an all-time high. That's not a bug — it's a feature. Economies and corporate earnings grow long-term, which means new highs are the normal state of a healthy market. Every all-time high today is the "bargain price" of tomorrow — assuming you stay invested long enough to see it.
The crash-fear exception
If you're sitting on the sidelines because you're afraid of an imminent crash, this article doesn't fully address your situation. Fear isn't rational, and data alone rarely solves it. Read our companion piece Investing Despite Crash Fears for the psychological playbook.
The lesson in one sentence
If you remember nothing else from this article, remember this:
Time in the market beats timing the market. Even with perfect knowledge. Even with a crystal ball. Even as God.
Stop waiting. Start a savings plan. Let compounding do the work. The data is unambiguous — and it's on your side.
Want the complete deep-dive on why monthly savings plans work? Read The Power of Savings Plans — or run your own numbers with the Compound Interest Calculator.
Frequently asked questions
Is Buy the Dip ever a good strategy?
Only in narrow circumstances: if you're already fully invested, have surplus cash, and are willing to deploy it aggressively during severe drawdowns (20%+). Even then, it's an add-on to your savings plan, not a replacement. As a primary strategy — waiting in cash for the perfect moment — it loses to DCA in 70% of all 40-year periods, even with perfect foresight.
What's the difference between DCA and a savings plan?
They're the same thing. Dollar Cost Averaging (DCA) is the American term; in Switzerland we call it a Sparplan or savings plan. Both mean: invest a fixed amount at regular intervals (usually monthly), regardless of what the market is doing.
Should I stop my savings plan if I think a crash is coming?
No. This is exactly the trap the research exposes. Every "imminent crash" in the last 100 years was either wrong or eventually overtaken by the recovery. Stopping your savings plan during a fear cycle means you miss the dip buying that comes automatically — which is the very advantage the savings plan gives you.
Does this research apply to the Swiss market or only the US?
Maggiulli's original analysis used U.S. market data, but the principle — time in the market beats timing — holds across all major developed markets. Any globally diversified equity portfolio, including CHF-based investors buying Swiss or global equities, benefits from the same dynamics.
What if I can't afford to invest every month?
Then invest whatever you can, whenever you can. Skipping a month because your boiler broke is fine. Waiting for a dip because you think you're smarter than the market is not. Consistency over years matters more than perfection in any single month.
Is lump sum investing really better than DCA?
Statistically, yes — in about two-thirds of historical cases. The catch is that lump sum requires a large amount today and the psychological strength to hold through an immediate crash. For most people, the savings plan is the realistic path. A common hybrid: invest 50% of your lump sum immediately, DCA the rest over 6–12 months.
How much should I invest monthly in a savings plan?
Whatever you can sustain for 30 years without stopping. CHF 100 is enough to start. CHF 500 is great. CHF 1'000 is excellent. The amount matters less than consistency. Better CHF 200 sustained than CHF 1'000 you abandon after six months.
Does the 70% figure account for cash earning interest while waiting?
Yes. Maggiulli's simulation credits the Buy-the-Dip strategy with TIPS (inflation-protected bond) returns on the waiting cash. Even with that generous assumption, DCA wins 70% of the time. If the waiting cash earned nothing, DCA's win rate would be even higher.
Calculators & further reading
The Power of Savings Plans
Why CHF 500/mo beats CHF 50'000 lump sum
Compound Interest Calculator
How your wealth grows over time
Investing Despite Crash Fears
The psychology of staying invested
Just Keep Buying (Maggiulli)
The book this article is based on
Savings Rate Calculator
How much per month for your goal?
Beginner's Guide to Investing
The complete Swiss playbook
Done waiting. Start investing.
You've read the research. You understand why time in the market beats timing the market. You know that even a perfect dip buyer loses 70% of the time. You know the crystal ball doesn't exist, and even if it did, it wouldn't matter.
There's one thing left to do.
This article is based on the analysis by Nick Maggiulli, "Even God Couldn't Beat Dollar-Cost Averaging" (Of Dollars and Data, 2019), author of the book Just Keep Buying. Written by Thierry Borgeat, Co-Founder of arvy, and reviewed by Patrick Rissi, CFA and Florian Jauch, CFA. All three invest their own money in the arvy portfolios. Last updated April 2026.
Disclaimer: This article is for general informational purposes only and does not constitute personal investment advice. Historical returns are not a guarantee of future results. Maggiulli's analysis uses U.S. stock market data from 1920–2018 and assumes TIPS (inflation-protected bond) returns on waiting cash. Actual returns for Swiss investors may vary. Investments involve risk, including the loss of principal. arvy is a FINMA-supervised asset manager. Legal notices & disclaimer
