DCA vs Lump Sum Calculator
Compare investing a cash sum all at once against spreading it out monthly, and see how much the wait costs in a rising market.
How it works
Monthly rate m = (1 + annual)^(1/12) − 1 · Lump sum = amount × (1 + m)^months · DCA = Σ (amount ÷ months) × (1 + m)^(months − i + 1)
Investing a lump sum puts every dollar to work immediately, so it compounds for the full period; dollar-cost averaging holds part of the cash on the sidelines and feeds it in gradually. When markets rise — which they do more often than not — the lump sum usually wins because the money spends more time invested. DCA’s advantage is not higher expected return but lower regret: it cushions the pain if the market falls right after you invest.
Worked example
You have $12,000 and expect a 7% annual return. Invested all at once, it grows for the full 12 months. Spread as $1,000 a month, the later instalments compound for only a few months, so the DCA balance ends up a bit lower than the lump sum in a rising market.
Frequently asked questions
Which strategy is better?
On expected value, lump sum wins about two-thirds of the time because markets trend upward and the money is invested longer. But dollar-cost averaging reduces the risk of buying right before a drop, which can matter more for peace of mind than the modest expected-return edge.
Is monthly investing from a paycheck the same as DCA?
Not exactly. Investing each paycheck as it arrives is simply investing as soon as you have the money — the optimal choice. True DCA means holding a lump you already have and deliberately spreading it out, which is the trade-off this tool models.
What if I expect the market to fall?
If you genuinely expect a decline, this tool shows DCA coming out ahead — but reliably predicting short-term drops is extremely hard. That uncertainty is exactly why many investors accept DCA’s slightly lower expected return for its smoother ride.
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Educational estimate, not investment advice. Returns are hypothetical and not guaranteed.