Dollar Cost Averaging Calculator
Compare investing a lump sum at once with spreading it over several months.
Dollar cost averaging means investing a fixed amount at regular intervals. You buy more shares when prices are low and fewer when they are high.
Investing a lump sum right away usually ends ahead, because markets rise more often than they fall. Averaging reduces regret if they fall early.
How it works
The lump sum grows at the expected return for the whole period. The averaging plan moves cash into the market a slice at a time.
Cash waiting to be invested earns the cash rate. Both plans are then valued at the end of the holding period.
The formula
Assumption = a steady return, so this shows the expected cost of waiting.
Tips
- If you would lose sleep over a 20% drop the week after investing, averaging is worth its small expected cost.
- Investing from each paycheck is averaging by default. That is a feature, not a flaw.
Frequently asked questions
Does dollar cost averaging beat lump sum?
Historically lump sum wins about two thirds of the time. Averaging wins when prices fall soon after you start.
This is not financial advice. Nothing on this site is investment, tax, legal or financial advice of any kind.
The calculators give simplified estimates from the numbers you enter. They ignore taxes, fees, rate changes and real market returns, and they can be wrong.
Do not make financial decisions based on these results. Speak to a licensed financial adviser, accountant or lender before acting, and read the full disclaimer.