Dollar Cost Averaging Calculator
This calculator shows what investing a fixed amount every month grows to, and the page explains how dollar-cost averaging (DCA) works, how it lowers your average cost per unit, and when a lump sum tends to do better. The calculator assumes each contribution is made at the start of the month and compounds monthly, so it shows slightly more than the tables further down, which assume end-of-month contributions. It is one of the calculators on our investing basics hub; for a projection with a starting balance and inflation adjustment, use the investment calculator, and for the maths of compounding itself, the compound interest calculator.
How Dollar Cost Averaging Works
Instead of investing a large sum at once, you invest smaller amounts regularly:
| Strategy | Action |
|---|---|
| Lump sum | Invest $60,000 today |
| DCA | Invest $500/month for 10 years |
DCA Example
Investing $500/month with varying prices:
| Month | Price/Share | Shares Bought | Total Shares | Total Value |
|---|---|---|---|---|
| 1 | $50 | 10 | 10 | $500 |
| 2 | $40 | 12.5 | 22.5 | $900 |
| 3 | $45 | 11.1 | 33.6 | $1,513 |
| 4 | $55 | 9.1 | 42.7 | $2,349 |
| 5 | $50 | 10 | 52.7 | $2,635 |
After 5 months: $2,500 invested → 52.7 shares → $2,635 value
Average price paid: $2,500 ÷ 52.7 = $47.44/share
DCA automatically buys more when prices are low (Month 2: 12.5 shares at $40) and less when high (Month 4: 9.1 shares at $55).
DCA vs Lump Sum Investing
Historical Analysis
Historical studies have generally found that a lump sum comes out ahead more often than not. Vanguard’s study of rolling one-year periods from 1976 to 2022 across several markets found that investing a lump sum beat spreading it out over the year between 61.6% and 73.7% of the time, while cost averaging did better in the worst markets. The usual explanations:
- Markets trend upward over time
- Lump sum gets more money working sooner
- DCA keeps some money on the sidelines
| Scenario | Lump Sum | DCA |
|---|---|---|
| Markets rise steadily | ✓ Better | Worse |
| Markets fall then rise | Worse | ✓ Better |
| Markets fall steadily | More loss | ✓ Less loss |
| Volatile, ending higher | ✓ Usually better | Sometimes better |
Why DCA Is Still Popular
| Benefit | Explanation |
|---|---|
| Psychological | Easier than investing everything at once |
| Risk reduction | Spreads market timing risk |
| Practical | Matches income (monthly paycheck) |
| Discipline | Automatic = consistent |
Anyone who invests part of each paycheque is already dollar-cost averaging.
DCA Investment Growth Examples
Assuming a 7% annual return, compounded monthly, with each contribution at the end of the month (figures rounded to the dollar):
$250/month
| Years | Contributions | Final Value | Growth |
|---|---|---|---|
| 5 | $15,000 | $17,898 | $2,898 |
| 10 | $30,000 | $43,271 | $13,271 |
| 20 | $60,000 | $130,232 | $70,232 |
| 30 | $90,000 | $304,993 | $214,993 |
$500/month
| Years | Contributions | Final Value | Growth |
|---|---|---|---|
| 5 | $30,000 | $35,796 | $5,796 |
| 10 | $60,000 | $86,542 | $26,542 |
| 20 | $120,000 | $260,463 | $140,463 |
| 30 | $180,000 | $609,985 | $429,985 |
$1,000/month
| Years | Contributions | Final Value | Growth |
|---|---|---|---|
| 5 | $60,000 | $71,593 | $11,593 |
| 10 | $120,000 | $173,085 | $53,085 |
| 20 | $240,000 | $520,927 | $280,927 |
| 30 | $360,000 | $1,219,971 | $859,971 |
When to Use Each Strategy
When DCA tends to fit
- Investing from regular income
- You have a large sum but fear market timing
- Markets feel overvalued (peace of mind)
- You’re new to investing
When a lump sum tends to fit
- You receive a windfall (inheritance, bonus)
- You have a long time horizon (10+ years)
- You can handle short-term volatility
- You accept that the historical odds have favoured it, not guaranteed it
Hybrid Approach
Invest some immediately, DCA the rest:
| Windfall | Lump Sum | DCA | Timeline |
|---|---|---|---|
| $100,000 | $50,000 now | $4,167/month | 12 months |
| $50,000 | $25,000 now | $2,083/month | 12 months |
This captures some upside while managing risk.
Setting Up Automatic DCA
Step 1: Choose Your Amount
Based on your budget:
| Monthly Income | Suggested DCA | % of Income |
|---|---|---|
| $4,000 | $400-800 | 10-20% |
| $6,000 | $600-1,200 | 10-20% |
| $8,000 | $800-1,600 | 10-20% |
Step 2: Choose Your Frequency
| Frequency | Pros | Cons |
|---|---|---|
| Weekly | More purchases, smoother | More transactions |
| Biweekly | Matches paychecks | 26 purchases/year |
| Monthly | Simple, common | Fewer purchases |
Step 3: Automate It
Most brokerages offer pre-authorized contributions (PAC), which move money from your bank account on a schedule. Some platforms can also buy your chosen investment automatically; at others you place the purchase yourself when the money arrives:
- Set contribution amount
- Set frequency
- Choose investment (e.g., XEQT, VEQT)
- Where the platform supports recurring purchases, the investment is bought automatically
Automation removes emotion: contributions happen without a monthly decision. See how to automate your investments.
DCA During Market Crashes
DCA shines during volatility:
| Month | Market | Price | $500 Buys |
|---|---|---|---|
| Jan | Normal | $100 | 5 shares |
| Feb | Crash | $70 | 7.14 shares |
| Mar | Bottom | $60 | 8.33 shares |
| Apr | Recovery | $80 | 6.25 shares |
| May | Normal | $100 | 5 shares |
In 5 months: $2,500 invested → 31.73 shares → about $3,173 at $100/share
By buying through the crash, you lowered your average cost and came out ahead.
Common DCA Mistakes
| Mistake | Problem | Solution |
|---|---|---|
| Stopping during crash | Miss low prices | Automate and ignore |
| Waiting for “dip” | Timing the market | Invest consistently |
| Too much cash reserve | Money not working | Invest each paycheck |
| Changing amounts often | Inconsistent | Set and forget |