How to use the calculator
- Enter the amount you have to invest and how many months you would spread it over with dollar-cost averaging.
- Set the market return you expect and the interest your cash earns while it waits, for example in a savings account or money market fund.
- Choose how long to compare the two, at least as long as the DCA period. Open Advanced to change the size of the crash and the swings in the volatile market.
Switch between the four markets above the chart to see how the value of each approach moves month by month.
What is dollar-cost averaging?
Dollar-cost averaging (DCA) means investing a fixed amount at regular intervals instead of all at once. With a lump sum on hand, it means splitting it into equal parts, for example twelve monthly purchases, and keeping the rest in cash until it is invested. When prices fall during that time, the later purchases buy more shares; when prices rise, they buy fewer.
How the comparison works
- Lump sum: everything is invested on day one.
- DCA: the amount ÷ months is invested at the start of each month; the money not yet invested earns the cash rate, compounded monthly.
- Four markets with the same long-run return: steady growth; an early crash (the market falls right after you start, then recovers); a late crash (it falls during the last three months of the DCA period); and a volatile market that swings up and down around the trend. They are shapes for comparison, not forecasts.
Example: $100,000 over 12 months, compared after 3 years
With a 7% market return, 4% on cash, a 30% crash and 8% swings:
| Market | Lump sum | DCA | Ahead |
|---|---|---|---|
| Steady growth | $122,504 | $120,783 | Lump sum by $1,721 |
| Early crash | $122,504 | $159,416 | DCA by $36,912 |
| Late crash | $122,504 | $124,776 | DCA by $2,272 |
| Volatile | $122,504 | $121,138 | Lump sum by $1,366 |
When markets rise, which they have done in most years, money invested sooner has longer to grow, so the lump sum usually wins. DCA wins when prices fall while you are still buying. In steady growth, the break-even is simple: DCA only comes out ahead if the market returns less than your cash.
What the research says
Studies of historical markets, including Vanguard’s widely cited research, found that investing a lump sum right away beat spreading it out roughly two-thirds of the time. DCA’s real benefit is emotional: it limits the regret of investing everything just before a fall, and for many people that makes it easier to invest at all.
Common mistakes
- Confusing DCA with saving from each paycheck. Investing your salary every month is the right thing to do; the question here is only what to do with money you already have.
- Leaving the cash idle. Money waiting to be invested should earn interest; at 0% the lump sum’s advantage grows.
- Stretching DCA over years. The longer the period, the more of your money sits out of the market.
To test the same choice with real prices of a stock or ETF, use the what if I had invested calculator with a monthly amount, or the portfolio backtest for a mix of funds.
Frequently asked questions
Is it better to invest a lump sum or dollar-cost average?
On average the lump sum has come out ahead, because markets rise more often than they fall and money invested sooner has longer to grow. DCA wins when prices fall during the months you are buying, and it reduces the risk of investing everything at a bad moment.
How often does a lump sum beat DCA?
Historical studies, including Vanguard's well-known research, found that investing all at once beat spreading the money over a year roughly two-thirds of the time. The calculator shows why: in steady growth DCA only wins if the market returns less than cash.
Over how many months should I spread my money?
If you choose DCA, 3 to 12 months is common. Longer periods leave more money out of the market and make the lump sum's advantage bigger in a rising market.
Does the interest on the cash matter?
Yes. The money not yet invested should earn interest, for example in a high-yield savings account or money market fund. The higher the cash rate, the smaller the cost of waiting.
What are the four markets in the calculator?
Illustrative shapes with the same long-run return: steady growth, an early crash right after you start, a late crash in the last three months of the DCA period, and a volatile market that swings up and down. They are not forecasts or historical data.
Is investing from every paycheck dollar-cost averaging?
It works the same way, but it isn't a choice: you invest money as you earn it. This calculator is about money you already have in hand.
Can I put this calculator on my website?
Yes. It is free for any site. Use the embed code generator at the bottom of this page, copy the code and paste it into your page. Please keep the credit line with the two links under the calculator.
Related calculators
- What If I Had Invested CalculatorWhat an investment in any US stock or ETF in any past month would be worth today, vs the S&P 500.
- Portfolio Backtest CalculatorHow a mix of up to 10 stocks and ETFs would have done: return, volatility and worst drawdown.
- Average Down CalculatorYour new average cost after buying more shares, or the shares needed to reach a target average.
- Asset Allocation & Rebalancing CalculatorHow far your portfolio has drifted from its target mix and the trades that bring it back.
See all free investing calculators, or add live stock quotes to your site with the free stock widgets.
Add this calculator to your website
The calculator is free to embed on any website, personal or commercial, and works on WordPress, Blogger, Wix, Squarespace, Webflow, Ghost and plain HTML. Choose the options, copy the code and paste it into your page.
Preview: this is how the calculator and the credit line will look on your page
Free for personal and commercial websites. Please keep the “by Quotelinks” credit line under the calculator visible and unchanged, and don’t modify the calculator or present it as your own. The <script> line is optional: it sizes the frame to fit the calculator; if your platform removes scripts, the calculator still works at the fixed height. The four markets are illustrative shapes, not forecasts or history. Results are for illustration only, not financial advice.