Dollar Cost Averaging Calculator

Calculate returns from investing fixed amounts at regular intervals to reduce market timing risk

Investment Parameters

Investment Amount Per Period

Amount to invest each period

Investment Frequency

How often you invest

Investment Period

Duration of investment strategy

Current Asset Price

Current price per share/unit

Expected Annual Return

Historical avg: S&P 500 ~10% annually

Price Volatility (Standard Deviation)

Market volatility (stocks ~15-20%)

Compare With

DCA Strategy Tips

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Invest consistently regardless of market conditions

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Automate your investments for best results

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Focus on long-term growth, not short-term fluctuations

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Consider index funds or ETFs for diversification

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Don't try to time the market

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Increase contributions as income grows

Market Averages

S&P 500 Historical Return

~10% annually (since 1928)

Typical Stock Volatility

15-20% standard deviation

Bond Market Returns

4-6% annually (historically)

Inflation Average

~3% annually (long-term)

Past performance doesn't guarantee future results

Understanding Dollar Cost Averaging

What is Dollar Cost Averaging?

Dollar Cost Averaging (DCA) is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of the asset's price. This approach helps reduce the impact of volatility and removes the emotion from investment decisions.

How It Works:

•When prices are high, your fixed investment buys fewer shares
•When prices are low, the same amount buys more shares
•Over time, this averages out your cost per share
•Reduces risk of investing all money at market peak

DCA vs. Lump Sum Investing

Research shows that lump sum investing typically outperforms DCA about 2/3 of the time in rising markets. However, DCA offers psychological benefits and risk reduction.

When to Use DCA:

• You're investing regular income (salary, etc.)
• You're concerned about market timing
• You want to reduce emotional stress
• You're building a long-term portfolio
• Markets are at all-time highs

When to Consider Lump Sum:

• You have a large amount to invest immediately
• You have long investment horizon (10+ years)
• You can tolerate short-term volatility
• Historical data favors your timeline

Calculation Methodology

Average Cost Per Share

The average price you paid for each share over time:

Average Cost = Total Invested ÷ Total Shares Purchased

Portfolio Return

Your total return on investment:

Return % = (Final Value - Total Invested) ÷ Total Invested × 100

Shares Purchased Each Period

Number of shares bought with each investment:

Shares = Investment Amount ÷ Current Share Price

Final Portfolio Value

Current market value of all shares:

Portfolio Value = Total Shares × Current Price

Real-World Example

Scenario: You invest $500 monthly for 12 months in a stock that fluctuates between $80 and $120.

• When price is $100, you buy 5 shares
• When price drops to $80, you buy 6.25 shares
• When price rises to $120, you buy 4.17 shares
• Total invested: $6,000 over 12 months
• Your average cost per share is smoothed out by buying more when prices are low
• This is better than investing $6,000 all at once at the wrong time

Best Practices for DCA

Automation

Set up automatic transfers from your bank account to your investment account. This removes emotion and ensures consistency.

Diversification

Use DCA with broad market index funds or ETFs rather than individual stocks for better risk management and diversification.

Long-Term Focus

DCA works best over long periods (5+ years). Don't stop investing during market downturns - that's when you're buying at discount prices.