Dollar Cost Averaging Calculator

About the Dollar Cost Averaging Calculator

Dollar-cost averaging (DCA) means investing a fixed dollar amount at regular intervals regardless of market conditions. It removes timing decisions, lowers your average cost when markets fall, and protects you from your own emotions. This page covers when DCA outperforms lump-sum and when it doesn't.

The Formula

Average cost per share = Total dollars invested ÷ Total shares acquired. When you DCA, you buy more shares at lower prices and fewer at higher prices, which mathematically yields a lower average cost than the average price over the period.

Worked Example

Investing $1,000/month for 6 months. Prices: $50, $40, $30, $40, $50, $60. Shares bought: 20, 25, 33.3, 25, 20, 16.7 = 140 shares. Total invested: $6,000. Average cost = $42.86. Compare to average price: $45.

Lump sum vs DCA

Mathematically, lump-sum investing wins about two-thirds of the time because markets trend up over the long run. DCA wins in flat or declining markets. The real win for DCA is behavioural — it gets people invested who would otherwise sit on cash waiting for the 'right time'.

DCA into your 401(k)

Every 401(k) contributor is automatically DCA'ing whether they know it or not. Each paycheck buys at the current price — sometimes high, sometimes low. This is one of the structural reasons 401(k) investors do better than they 'feel' like they should.

When DCA backfires

If you have cash to invest right now (sale of property, inheritance, bonus), DCA over 12+ months on average loses to lump-sum. If you're investing from each paycheck, DCA isn't optional — that's just how income works.

Common Mistakes

• Pausing DCA during downturns. Those are when each dollar buys the most shares — exactly what you want.
• DCA'ing a lump sum over years 'because the market feels high'. The market always feels high. Statistically, lump-sum wins.
• Forgetting to rebalance. DCA accumulates over time; the resulting portfolio drifts from your target allocation.

Frequently Asked Questions

Is DCA the same as 'buy the dip'?
No. DCA is automatic and consistent. 'Buy the dip' requires timing the market, which doesn't work reliably.

Over how long should I DCA a lump sum?
6-12 months is a common compromise — gets most of the lump-sum advantage while smoothing entry points.

This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a licensed professional before making significant financial decisions.