Dollar Cost Averaging (DCA) Calculator
Calculate how regular monthly investments reduce risk and smooth out market volatility
Inputs
Use negative for price drops, positive for gains
DCA Results
DCA vs Lump Sum Comparison
Dollar Cost Averaging
Lump Sum Investment
What is Dollar Cost Averaging?
Dollar Cost Averaging (DCA) is an investment strategy where you invest a fixed amount of money at regular intervals, regardless of the asset's price. This approach helps reduce the impact of volatility on your overall investment.
Benefits of DCA:
- Reduces timing risk: You don't need to predict market movements
- Smooths out volatility: You buy more shares when prices are low, fewer when high
- Disciplined investing: Encourages regular, consistent investment habits
- Emotional benefits: Reduces stress from trying to time the market
Frequently Asked Questions
Is DCA better than lump sum investing?
DCA reduces risk and emotional stress, but historically, lump sum investing has slightly better returns since markets tend to go up over time. DCA is better for risk-averse investors or when you don't have a large lump sum available.
How often should I invest with DCA?
Monthly investments are most common, but you can invest weekly, bi-weekly, or quarterly. The key is consistency. More frequent investments can further smooth out volatility.
Does DCA work in all market conditions?
DCA works best in volatile or declining markets where you can buy more shares at lower prices. In consistently rising markets, lump sum investing may perform slightly better, but DCA still provides solid returns with less risk.