Dollar Cost Averaging Calculator

Compare investing a lump sum all at once versus spreading investments over time

Strategy Comparison

Lump Sum
$14,499
+$2,499 gain
Invest $12,000 on day one
VS
Dollar Cost Averaging
$12,180
+$180 gain
$500/month for 24 months
Lump Sum wins by $2,319 (19.0%)
Total Invested $12,000
DCA Average Cost $119/share
Lump Sum Cost $100/share
Shares Owned (DCA) 100.81

Portfolio Value Over Time

Understanding Dollar Cost Averaging

DCA is the practice of investing fixed amounts at regular intervals, regardless of market conditions.

The Math: Lump Sum Usually Wins

Historically, investing a lump sum outperforms DCA about two-thirds of the time because markets tend to go up over time.

  • Markets rise more often than they fall (upward bias).
  • Money invested earlier has more time to compound.
  • DCA means cash sits uninvested, earning less.
  • Vanguard study: Lump sum beats DCA 68% of the time.

When DCA Makes Sense

Despite the math, DCA can be the right choice for many investors, especially those who prioritize emotional comfort.

  • You don't have a lump sum (regular paychecks).
  • Volatile markets cause you stress.
  • You'd regret a poorly-timed lump sum investment.
  • Peace of mind is worth more than optimal returns.

Practical Tips

Regardless of strategy, the most important thing is to invest consistently and for the long term.

  • Automate your investments to remove emotion.
  • Don't time the market - time in the market wins.
  • Both strategies beat not investing at all.
  • Consider your risk tolerance and sleep quality.