Dollar-Cost Averaging Calculator

How this is worked out

Dollar-cost averaging means investing a fixed amount of money at regular intervals, rather than a fixed number of units. That distinction is the whole mechanism. When the price is low your fixed amount buys more units; when it is high it buys fewer. So you automatically accumulate more units at cheaper prices without having to judge anything.

The average price you pay is therefore not the simple average of the prices. It is the harmonic mean, which is always lower:

average paid = total invested ÷ total units bought

The calculator simulates each purchase individually rather than using a shortcut, which is why the price-path option changes the answer. Try switching between the three paths with the same start and end prices. The endpoints are identical; the results are not. A price that dips and recovers hands you cheap units in the middle and beats the straight line. A price that spikes and falls back does the opposite.

This is the honest version of the idea. Dollar-cost averaging is not a way of making more money on average — over a rising market, investing everything at the start usually wins, because the money is exposed for longer. What it does is reduce the consequence of being unlucky with your timing, and make regular investing psychologically survivable.

A worked example

500 a month for 60 months, price starting at 100 and ending at 150, rising steadily:

• Invested: 30,000
• Average price paid: about 122
• Final value: about 36,800, a 23% return
• The same 30,000 invested on day one: 45,000

The lump sum wins clearly here, and that is not a flaw in the method — it is what happens when a market rises the whole way through and you spent five years slowly getting invested.

Now switch the price path to fell first, then recovered. Same start, same end. The averaging result rises to roughly 43,000, because the monthly buys were picking up units at 70 and 80 while the lump-sum investor sat through the fall fully exposed. Its advantage is protection against bad timing, not superior returns.

What this doesn't cover

• The three price paths are illustrative shapes, not forecasts. Real prices do not move in smooth curves. They exist to show how path affects outcome, which a single average return conceals.
• Trading fees, spreads and currency conversion costs are not deducted. On small monthly amounts, flat per-trade fees can matter a lot.
• Dividends and distributions are not included, so for income-paying investments the real result would be higher.
• Nothing here is a recommendation to invest in anything.

Common questions