How DCA Works

Dollar cost averaging invests a fixed amount at regular intervals regardless of price. You buy more shares in down markets and fewer in up markets, which mechanically lowers your average cost per share. This dollar cost averaging calculator compares the DCA path against investing the full amount upfront.

Lump Sum vs DCA

Studies (Vanguard, 2012) show lump sum outperforms DCA about 67% of the time over 6–12 months because markets trend upward and time-in-market dominates. DCA wins when the market falls after your start date. The right choice depends on your tolerance for a possible early drawdown.

Practical Advice

For paychecks: automate monthly contributions — that IS dollar cost averaging and needs no decision. For windfalls: a middle path — invest half immediately, DCA the rest over 6–12 months — balances expected return with sleep at night. Whatever you choose, stay invested for the full horizon.