Stock Dollar-Cost Averaging Calculator
Simulate periodic equal-dollar buys across a price series.
Overview
Dollar-cost averaging (DCA) is the strategy of investing a fixed dollar amount on a regular schedule regardless of price. When the asset is cheap, the fixed contribution buys more shares; when it is expensive, the same dollars buy fewer. The result is an average cost per share that is mathematically lower than the average price across the same period — a consequence of the harmonic-mean inequality. DCA appeals to retail investors because it removes the burden of timing the market and enforces a savings habit.
A DCA simulator replays a price series with the chosen contribution and frequency, producing the share count accumulated, the total invested, the final position value, and the realised return versus a lump-sum baseline. The result is sometimes counterintuitive: in a steadily rising market, lump-sum investing outperforms DCA because the money is at work earlier. In a choppy or declining-then-recovering market, DCA wins by accumulating more shares during the dip.
How it works
For each interval, the contribution amount divided by the period's price yields the shares purchased: shares_bought = contribution / price. Cumulative shares grow; total invested grows linearly; current value at any date is cumulative_shares × current_price. Average cost per share is total_invested / cumulative_shares. Average market price across the same dates is the arithmetic mean. The two figures together quantify the DCA edge during volatile periods. Return is (final_value − total_invested) / total_invested.
Examples
- $500/month into a stock that goes $50, $25, $40, $60, $50 over five months: buys 10, 20, 12.5, 8.33, 10 = 60.83 shares for $2,500. Average cost ≈ $41.10 versus average price $45.
- Same $2,500 lump-sum at month 1's $50: 50 shares — fewer than DCA captured during the drop.
- $1,000/month over 20 years into a rising index returning 8% annually: DCA underperforms a $240,000 lump-sum equivalent by a meaningful margin because the lump-sum compounds longer.
- $200/week through a flat-then-rising volatile period: DCA's average cost can be 10–20% below the simple average price.
FAQ
Is DCA always better than lump-sum investing?
No. Roughly two-thirds of the time, lump-sum outperforms because markets trend up. DCA wins in choppy markets and reduces regret.
Does DCA work for crypto?
The mechanics are identical and the volatility is higher, so DCA's smoothing effect is more pronounced.
What frequency is best?
Weekly, biweekly, or monthly are all defensible. The frequency matters less than discipline and avoiding pauses.
How are taxes affected?
Each purchase establishes its own cost basis, so lot-level reporting becomes important at sale time.
Should I stop DCA when the market drops?
The whole point is to continue — buying more shares at lower prices. Stopping during dips defeats the strategy.