Dollar-Cost Averaging Calculator

What is dollar-cost averaging?

Dollar-cost averaging, in this calculator, means adding a chosen amount on a chosen schedule. Weekly, fortnightly, monthly, quarterly and annual schedules are all fixed intervals. The amount does not change because a price moved, because this page does not use prices. It uses the return you type.

DCA and a lump sum

A lump sum invests a budget at the start. A scheduled path invests it in parts. If the whole budget is already available, the comparison can hold that budget constant and leave the uninvested part in cash. If the money arrives later as income, the scheduled path is the plan that matches the cash you have. A lump sum of income you have not received yet is a counterfactual, and the page labels it that way.

Why funding availability matters

Comparing a monthly contribution with a lump sum of every future contribution treats those future contributions as cash that exists today. That is a useful timing question only when the cash really is available. When it is not, the lump sum is a different budget, not an alternative use of the same money. The two modes keep that distinction visible. Cash that has not been invested is not drawn as if it were already in the market.

How return sequences affect outcomes

A constant return makes earlier investment earn that return for longer, so a lump sum of available cash finishes higher when the rate is positive and cash earns nothing. A sequence can reverse the comparison. Two lists with the same cumulative product can still leave a different result for contributions that arrive in the middle, because those contributions miss the returns that already happened. Sample paths on this page are synthetic arithmetic. They are not a record of a market.

Contribution timing

Beginning-of-period contributions are added before that step’s return. End-of-period contributions are added after it. At a zero return, and with a zero cash return, the timing does not create investment growth. A difference appears only when the assumed path gives the earlier cash a return, or a loss.

Compounding and fees

The effective-annual convention converts the typed year rate with (1 + rate) ^ (1 / steps) − 1. The nominal convention divides the typed rate by the number of steps. An annual fee, if you type one, is taken once a year from the invested balance after that year’s growth and contributions. The ending value is already net of that fee. Inflation, if you type it, divides wealth by (1 + inflation) ^ years. It does not remove the fee a second time, and it is not a tax calculation.

Common mistakes

• Comparing a monthly amount with the same amount once a year, and treating the totals as if they matched.
• Ignoring cash that sits outside the market while a schedule is still investing.
• Reading a constant annual return as a description of every future year.
• Leaving out transaction costs that a real schedule might pay. This page charges a fee only when you type one.
• Calling the total contributed “growth”. Growth is the ending invested balance minus the capital added.
• Treating the projection as a forecast, or as a promise that regular investing prevents a loss.
• Treating contribution timing as a guarantee of a lower purchase price. This calculator does not model purchase prices.

Worked example

The desk opens with no initial investment, 500.00 at the end of each month, a 5 percent effective annual return, monthly compounding and 10 years. The scheduled capital is 60,000.00. The invested balance is 77,181.58. Modelled growth is 17,181.58. If that same 60,000.00 is available at the start, invested at once, and uninvested cash earns nothing, the lump-sum balance is 97,733.68 and ending cash on the scheduled path is 0.00. The lump-sum figure is higher because the budget is invested earlier under this positive constant rate. Change the rate, the sequence or the funding mode and the comparison can change. These figures are the same engine as the desk. They are not a forecast.

Assumptions and limitations

The schedule invests an initial amount and a regular contribution at the frequency and timing you choose. Equal-upfront-capital mode holds the full budget constant and leaves uninvested money in cash. Future-income mode invests contributions as they are added and labels a lump sum of later income as a counterfactual. The return is an assumption, including a sequence you type. It is not a forecast and it is not a price history.

How the calculation works

The invested balance uses the compound-growth engine. An effective annual return becomes (1 + rate) ^ (1 / steps) − 1. A nominal annual rate is divided by the number of steps. Contributions are added at the beginning or the end of each step, not silently at year-end. In equal-upfront-capital mode the budget starts as cash, moves into the investment on the schedule, and earns only the cash return until then. Ending wealth is the invested balance plus that cash. The lump sum invests the same budget at the start. A fee you type is taken once a year from the invested balance. Inflation divides wealth by (1 + inflation) ^ years.

Assumptions

• The return, cash return, fee, inflation and contribution growth are figures you type.
• Equal-upfront-capital mode treats the full contribution budget as available on day one. Future-income mode does not.
• Uninvested cash is not part of the invested balance.
• A higher ending wealth under a constant positive return means the budget was invested earlier in this model. It does not rank the habits for every return path.
• Taxes are excluded. No broker charge is added unless you type a fee.

A worked example

No initial investment, 500 at the end of each month, a 5 percent effective annual return, monthly compounding and 10 years. The cash contributed is 60,000. The invested balance is 77,181.58. Modelled growth is 17,181.58. If that same 60,000 is available at the start and the cash return is zero, the lump-sum balance is 97,733.68 and ending cash on the scheduled path is 0. The gap is earlier investment under this constant rate. A negative rate or a return sequence can change which path finishes higher.

Limitations

The page does not use market prices, so it cannot show a contribution buying more units after a fall. Frequency comparisons that reuse one amount at every interval are investing different totals, and the same-budget mode is the fair comparison. A projection is not a forecast. Regular investing does not remove the possibility of a loss. Contribution timing is not a promise of a lower purchase price.

Change one input at a time if a result looks surprising. The arithmetic is only as careful as the numbers you type, and it does not know your broker’s contract size.

Dollar-Cost Averaging Calculator recalculates as you type. Reset restores the starting figures on that page. Those figures are an illustration of the arithmetic, not a market observation and not a record of anyone’s account. Copy and export repeat the same rounded results. Cash amounts on screen are shown to two decimal places. A conversion, a margin schedule, or a programme rule that you leave blank is not invented. A zero divisor, a stop on the wrong side of an entry, or a target-weight total other than 100 percent produces a written explanation instead of a blank or infinite number.