DCA Inputs
DCA Formula
DCA Results
DCA bought more shares during lower-price periods and ended ahead in this sample path.
Average Cost by Purchase
Formula Breakdown
Period-by-Period Schedule
| Period | Price | Investment | Shares Bought | Cumulative Shares | Running Avg Cost |
|---|
Model Assumptions
- Each period invests the same fixed dollar amount.
- All scheduled prices and final/current price must be greater than zero.
- Lump-sum comparison invests the same total dollars at the first scheduled price.
- No dividends, taxes, commissions, bid-ask spreads, slippage, stock splits, or cash interest modeled.
- Results are deterministic scenario math, not a forecast of future returns.
- Regular contributions are different from holding a windfall in cash before gradual deployment.
For educational purposes. Not financial advice. Market conventions simplified.
Understanding Dollar-Cost Averaging
Video Explanation
Video: Dollar-Cost Averaging Explained | Better Than Timing the Market?
What is Dollar-Cost Averaging?
Dollar-cost averaging is a fixed-dollar investing schedule. You invest the same amount each period regardless of whether the market is up or down. When prices are low, that fixed amount buys more shares. When prices are high, it buys fewer shares.
For equal fixed-dollar purchases, this is the harmonic mean of the purchase prices.
DCA vs Lump Sum
This calculator compares DCA with a lump-sum path using the same total dollars. If prices fall after the first purchase and later recover, DCA may win because it bought more shares at lower prices. If prices rise steadily, lump-sum investing usually wins because more capital was invested earlier.
Regular Contributions
Paycheck investing
DCA is often the natural approach when money becomes available over time through wages, 401(k) contributions, or monthly savings.
Windfall Deployment
Cash available now
Gradual investing can reduce regret risk, but delaying investment also creates opportunity cost if markets rise.
When to Use This Calculator vs. Stock Average Calculator
Use this calculator to test a recurring fixed-dollar DCA schedule and compare it with a lump-sum scenario. Use the Stock Average Calculator when you already have arbitrary historical purchase lots and simply need cost basis.
Frequently Asked Questions
Disclaimer
This calculator is for educational purposes only and does not constitute investment advice. It uses hypothetical prices and does not account for dividends, taxes, fees, bid-ask spreads, stock splits, or cash interest. Actual investment results will vary, and past performance does not guarantee future returns.
