About this calculator
Dollar-cost averaging (DCA) is the practice of investing a fixed amount on a regular schedule (e.g., $500 every month) regardless of price. Over time, you buy more shares when prices are low and fewer when prices are high, which automatically lowers your average cost basis compared to a lump-sum at the period high.
The math behind monthly DCA
Future value of a $C monthly contribution at rate r over n months is C × ((1 + r/12)n − 1) / (r/12). A $500/month investment over 20 years at 8% returns yields about $294,000 — from $120,000 contributed plus $174,000 in market gains.
DCA vs lump sum — what the research says
Vanguard's well-known study found that lump-sum investing outperformed DCA in about two-thirds of historical periods, because markets rise more often than they fall. But DCA wins behaviorally: it removes the timing decision, smooths the emotional cost of a market drop, and is the only practical method for anyone investing from paycheck income (which is most people).
Where DCA actually shines
High-volatility assets (single stocks, crypto, small-cap funds) benefit more from DCA than broad indices. The cost-averaging effect is stronger when prices swing widely. For a stable index fund, the DCA vs lump-sum gap is smaller — both work fine.