DCA Calculator
Simulate a dollar cost averaging strategy for stocks to see how periodic investments grow over time. Compare DCA versus lump sum investing and visualize your portfolio's projected growth.
Investing $500 per month for 10 years at an average 10% annual return would turn your $60,000 in total contributions into approximately $103,276 — earning $43,276 in returns (72.1% total gain). The longer you stay consistent, the more compounding works in your favor.
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Frequently Asked Questions
Understanding dollar cost averaging
What is dollar cost averaging?
Dollar cost averaging (DCA) is an investment strategy where you invest a fixed dollar amount at regular intervals — regardless of whether the market is up or down. When prices are lower, your fixed amount buys more shares. When prices are higher, you buy fewer shares. Over time, this naturally lowers your average cost per share compared to trying to time the market.
DCA is the strategy behind every 401(k) contribution and automatic investment plan. By removing the emotional decision of when to invest, it keeps you consistently building wealth through market ups and downs.
DCA vs lump sum investing
Academic research shows that investing a lump sum immediately outperforms DCA about two-thirds of the time, since markets tend to rise over long periods. However, DCA significantly reduces the risk of investing a large sum right before a downturn.
The best strategy depends on your situation. If you receive a windfall, lump sum investing maximizes expected returns. But if you earn money periodically (like a paycheck), DCA is often a natural fit — you invest each paycheck as it arrives rather than letting cash sit idle.
Can I backtest DCA against a real stock or the S&P 500?
Yes. Open Backtest with Real Stock and enter a ticker to replace the fixed return assumption with actual historical prices, so you see exactly what consistent investing would have produced. It works for individual stocks and for index ETFs, which is the closest proxy to dollar cost averaging into the broader market.
Try a few one-click backtests: DCA into the S&P 500 (SPY), the Nasdaq-100 (QQQ), or the total US market (VTI). Each result also shows the lump-sum comparison for the same period.
Is DCA good in a falling market?
This is where DCA shines. Because you invest a fixed dollar amount each period, a lower price simply buys more shares, pulling your average cost down while the market is cheap. When the market recovers, those extra shares accelerate your rebound.
The trade-off is the mirror image: in a market that mostly rises, holding cash to invest gradually means part of your money sits on the sidelines, which is why lump sum wins on average. DCA buys consistency and lower regret risk, not the highest possible expected return. To see how your average cost forms across purchases, use the Cost Basis Calculator.
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For informational and educational purposes only — not investment advice.