Investing
Dollar-Cost Averaging Calculator
Sitting on a windfall raises an uncomfortable question: invest it now, or feed it in gradually? Spreading purchases feels safer, and it does limit regret — but at any positive expected return it starts from behind, because less of the money is invested for less time.
Cost of spreading it out
$4,745
What the caution costs at this steady return.
- Invested all at once
- $133,178
- Spread over the months
- $128,433
- Share of the difference
- 3.56%
How much of the final balance the delay gives up.
How this calculator works
The lump sum compounds monthly for the full holding period. The averaged version splits the amount into equal monthly instalments, each compounding only for the months remaining after it is invested. Both are held to the same end date, so the comparison isolates timing alone.
A single steady return is assumed, which is exactly the assumption that favours investing immediately — real markets fall as well as rise, and that variability is the whole reason averaging appeals. Treat this as the expected cost of caution, not a prediction.
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Frequently asked questions
Is dollar-cost averaging better than investing a lump sum?
Historically, no — studies of US and global markets find investing immediately beats averaging in roughly two-thirds of periods, because markets rise more often than they fall. Averaging wins in the third where the market drops after you would have bought.
Then why does anyone spread it out?
Because the maths and the stomach are different problems. Investing a life-changing sum the day before a 20% drop is the kind of experience that makes people abandon investing altogether. Averaging over six to twelve months buys emotional insurance, and the figure above is the premium.
Is my monthly 401(k) contribution dollar-cost averaging?
Not really — it is just investing money as you earn it, which is the only option available. True DCA means deliberately holding cash you already have and releasing it slowly. Contributing from each paycheque is simply immediate investing on a payroll schedule.
How long should I spread it over if I do?
Long enough to feel manageable, short enough to limit the drag: six to twelve months is the usual compromise. Set the dates in advance and automate them, because the failure mode of averaging is stopping halfway when markets fall — precisely when the remaining purchases matter most.
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Disclaimer: DayCents provides this calculator for educational purposes only. Results are estimates based on your inputs and the stated assumptions — they are not financial advice, a quote, or an offer of credit. Consult a qualified financial professional before making major money decisions.