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.

Tested against worked examplesHow we verify

Amount to invest

Expected annual return

Months to spread it over

Total years held

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%

Spread out$128,43396%

Given up$4,7454%

Compare scenariosTry three values of one input

Vary

Dollar-Cost Averaging Calculator results for three values of Amount to invest
Amount to invest
Cost of spreading it out	$4,271	$4,745+$475	$5,220+$949
Invested all at once	$119,861	$133,178+$13,318	$146,496+$26,636
Spread over the months	$115,590	$128,433+$12,843	$141,276+$25,687
Share of the difference	3.56%	3.56%−0%	3.56%+0%

Every other input stays at the value you set above — currently $60,000 for amount to invest. Differences are measured against the first column.

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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.

What this assumes

Regular contributions at fixed intervals into a volatile asset, using the price path you enter or a constant return.
It assumes you continue through downturns, which is the entire mechanism and the part people abandon.
It does not model fees or the bid-ask spread on frequent small purchases.

What changes this number

Whether you keep going in a fall: Buying more shares at lower prices is the whole benefit, and it only exists if you do not stop.
Lump sum versus averaging: Historically, investing a lump sum immediately has beaten averaging about two-thirds of the time. Averaging buys regret insurance instead.
Contribution consistency: Automation beats intention, which is why a 401(k) is the most successful DCA scheme ever built.

A worked example

Take the $60k over 12 months, held 10 years scenario. These figures are produced by the calculator above, not written alongside it, so they always match what the tool returns.

What you enter

Amount to invest: $60,000
Expected annual return: 8%
Months to spread it over: 12 months
Total years held: 10 years

What it returns

Cost of spreading it out: $4,745
Invested all at once: $133,178
Spread over the months: $128,433
Share of the difference: 3.56%

Try an example

$60k over 12 months, held 10 years Spread over 6 months Cautious: 24 months

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.