Dollar-Cost Averaging (DCA) Calculator
Model an initial balance and regular end-of-period contributions under a constant annual-return assumption. No share prices or average purchase cost are calculated; returns can be negative.
Investment Details
Contributions are added at the end of each selected period. The default 8% is an illustration, not an expected market return. Fees, tax and inflation are excluded.
Contribution and Return Scenario
Yearly scenario values
| Year | Contributed ($) | Scenario balance ($) |
|---|---|---|
| Year 0 | 10,000 | 10,000 |
| Year 1 | 22,000 | 23,233.89 |
| Year 2 | 34,000 | 37,526.48 |
| Year 3 | 46,000 | 52,962.49 |
| Year 4 | 58,000 | 69,633.37 |
| Year 5 | 70,000 | 87,637.93 |
| Year 6 | 82,000 | 107,082.85 |
| Year 7 | 94,000 | 128,083.37 |
| Year 8 | 106,000 | 150,763.92 |
| Year 9 | 118,000 | 175,258.92 |
| Year 10 | 130,000 | 201,713.52 |
What is Dollar-Cost Averaging (DCA)?
Dollar-cost averaging means making equal-sized investments at recurring intervals rather than choosing each purchase based on recent price movements. See the SEC investor glossary for that definition.
Actual DCA purchases acquire different numbers of shares as prices change. This calculator does not model those prices. It shows a constant-return cash-flow scenario, which can help check contribution arithmetic but cannot compare real market paths.
What Regular Contributions Do—and Do Not—Show
- A schedule: Regular deposits make the contribution plan explicit; they do not guarantee a gain or remove investment risk.
- Cash timing: Staging an existing lump sum leaves some cash uninvested. Investing newly earned income as it arrives is a different comparison.
- Tradeoffs: Holding cash back can miss market gains, while repeated purchases can create additional transaction costs. FINRA describes these limitations.
- A model: Constant compounding ignores the order and variability of actual returns. A smooth chart is an assumption, not a market forecast.
How to Use This Calculator
- Enter Initial Investment: Start with the amount of money you have ready to invest today. If you are starting from zero, enter 0.
- Set Regular Contribution: Decide how much you can afford to invest periodically (e.g., from your monthly salary).
- Choose Frequency: Select how often you will make these end-of-period contributions. The amount entered applies to each contribution, so changing frequency also changes the annual total.
- Determine Time Horizon: How long do you plan to model? Select 1 to 50 whole years. Longer horizons magnify the effect of the assumed return, including negative returns.
- Set a Return Assumption: Enter an effective annual rate. Each period uses (1 + annual rate)^(1 / periods per year) − 1; the contribution is added after that period's return.
Frequently Asked Questions
Does this calculate average cost per share?
No. It does not use purchase prices or share counts. It compounds an entered starting amount and adds a fixed contribution each period, so it is a savings-growth scenario rather than a historical DCA backtest.
How is annual return converted?
The input is an assumed effective annual return. For m periods per year, periodic return is (1 + annual return)^(1/m) − 1. Each period first applies that return to the existing balance, then adds the contribution. The same return is used every period.
Is DCA always better than investing available cash immediately?
No. Staging available cash changes market exposure and can miss gains while funds remain uninvested. Regularly investing new earnings is a different cash-flow situation. This constant-return model does not compare risk or determine which strategy will perform better.
Are inflation, fees and tax included?
No. Results are nominal and exclude fees and taxes. For a separate purchasing-power calculation at constant inflation i, divide a nominal balance at year t by (1 + i)^t. Subtracting inflation from the return and leaving nominal contributions unchanged does not perform that conversion.
What values can I enter?
Use nonnegative initial and recurring amounts, a whole number of years from 1 to 50, and a finite annual return greater than −100%. Zero amounts and zero returns are valid. Negative returns produce a loss scenario; the default 8% is illustrative, not a market forecast.
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