Compare spreading a lump sum over 6-24 months against investing it all at once. See your average cost per share, total shares accumulated, and the ending balance under each strategy.
Enter your plan and press Calculate to see the comparison.
Situation: A retiree receives a $60,000 rollover and wants to avoid buying at a peak. VOO trades near $500 and they expect 8% annual returns.
How it's computed: Divide $60,000 by 12 monthly purchases of $5,000. Each month's share count is $5,000 divided by that month's price (price = $500 × (1+0.08/12)^month). Sum the shares and mark to market after a year.
About 115.7 shares accumulated at an average cost of $518.47; DCA position ends near $62,665 versus $64,800 for a one-time lump sum.
Situation: A business owner sells a stake and spreads $120,000 over two years into a $400 ETF expecting 7% returns.
How it's computed: 24 purchases of $5,000 each. Because prices rise along the expected path, later buys cost more and buy fewer shares — this is the classic DCA drag in a rising market.
Approximately 280.8 shares; DCA ends near $129,154 vs $137,388 lump sum.
Situation: A new investor with $25,000 wants to enter during a choppy stretch where a 12% annual trend is priced in but month-to-month swings dominate.
How it's computed: Six equal $4,166.67 buys. Short windows minimise the cash-drag but also give less time to average down if a dip arrives.
Around 48.8 shares; DCA value near $25,890 vs $26,458 lump sum.
Dollar-cost averaging buys a fixed dollar amount on a fixed schedule. The share count per period is the contribution divided by that period's price:
sharesₚ = contribution ÷ priceₚ
Your average cost per share is total dollars invested ÷ total shares purchased — the harmonic mean of the prices paid, which is always at or below the arithmetic mean price when prices vary.
When price dips, your fixed contribution buys more shares; when price rises, it buys fewer. That weighting pulls the average cost down relative to a simple price average — the mathematical core of DCA.
Vanguard's 2023 study "Dollar-cost averaging just means taking risk later" compared lump-sum investing with 6- and 12-month DCA across rolling US, UK, and Australian windows. Because equity markets rise more often than they fall, lump-sum investing beat DCA roughly two-thirds of the time in the US — but DCA cut the average loss in the worst 5% of windows by about a third. DCA is a risk-management choice, not a return-maximising one.
| Window | Lump sum wins | DCA wins | Best use |
|---|---|---|---|
| 6 months | ~70% | ~30% | You can tolerate short-term volatility |
| 12 months | ~66% | ~34% | Balanced — the most common default |
| 24 months | ~62% | ~38% | Large windfall you must not buy at a peak |
Illustrative frequencies based on rolling historical windows; past performance does not guarantee future results.
⚠️ Important: This calculator models a smoothed, steadily-rising price path to make the DCA mechanics visible. Real markets move in irregular steps, so actual results will differ. It ignores taxes, trading commissions, bid-ask spreads and dividend reinvestment. Past returns do not predict future results.
DCA is most useful when the amount you are investing is large relative to your portfolio and the timing feels stressful — a rollover, an inheritance, a bonus, the sale of a business, or proceeds from selling a home. It is least useful for steady paycheck contributions, where it happens automatically, or for money you will need within a year.
If you can honestly say a 20% drawdown two months after investing would not change your plan, lump-sum investing has the better expected outcome. If it would make you sell, DCA is the better psychological fit and that is a legitimate reason to choose it.
In a steadily rising market, DCA buys more shares early and fewer later, so it underperforms a lump sum. In a falling market the opposite happens: DCA keeps cash available to buy at lower prices while a lump-sum investor is fully exposed. The expected-return gap is the price you pay for the smoother ride.