Free calculator
Dollar-Cost Averaging Calculator
Enter what you invest each month, for how long and at what return. This shows the total contributed, what it grows to, and how much of the ending balance is money you added rather than money you earned.
Ending value
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Enter a contribution and a horizon.
- Total contributed
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- Growth on top
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- Gain on contributions
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- Growth as a share of the balance
- Final monthly contribution
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- Same total invested on day one
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Everything runs in your browser. The return is applied smoothly every month, which no real market has ever done.
Contributions against value
The lower line is the money you put in. The upper line is what the account is worth. The gap between them is compounding, and it stays narrow for years before it takes over.
The day one line is a same-return comparison, not a forecast. It assumes the whole sum was available at the start and earned exactly the same annual rate.
How the calculation works
Each contribution earns for a different length of time, so the calculator runs the balance forward one month at a time rather than applying a single formula:
New balance = (old balance + this month's contribution) x (1 + monthly rate)
The monthly rate is the twelfth root of one plus the annual rate, so 7% a year becomes
1.07^(1/12) - 1 = 0.5654% a month. Twelve of those compound back to exactly
7%, which a flat 7/12 would not.
With the defaults, $500 a month for 20 years at 7%:
- Total contributed:
$500 x 12 x 20 = $120,000. - Ending value:
$255,203. - Growth:
$135,203, which is 113% of everything you put in. - Growth as a share of the final balance:
53%.
More than half the ending balance is money nobody deposited. That is the entire argument for starting early, and the first contribution in that series spends 240 months compounding while the last one spends none.
Reading the day one comparison honestly
The third line invests the entire $120,000 on the first day at the same 7% and ends at about $464,000. That gap is not evidence that you should have done it, because in the monthly plan the money did not exist on day one. It arrived with each paycheck.
The comparison only becomes a real decision when you already hold a lump sum and are choosing between investing it now or spreading it over a year. The historical answer leans toward investing it at once, because time in the market is worth more on average than the protection of averaging in. The averaging plan wins in exactly the paths that worry people, where the market falls hard soon after the money goes in. Both cases, with the evidence, are in dollar-cost averaging vs lump sum.
What actually moves the ending value
Four inputs matter, in roughly this order: how many years you contribute, how much you contribute, the return you earn, and the fees you pay to earn it. Only the first two are under your control. The third is a market outcome you inherit. The fourth is a choice you make once when you pick the fund, and it compounds against you exactly as returns compound for you, which the expense ratio calculator puts in dollars.
Set the annual increase to 3% and the same plan ends materially higher, because each raise starts compounding immediately. Most people find raising the contribution with their pay easier than finding an extra two points of return, and it does not require being right about anything.
For where the contributions should go, start with asset allocation and index funds explained. Once the account is large enough that the weights matter, the rebalancing calculator shows what to buy and sell to keep the allocation on target. To see what any of these balances is worth in today's money, run the ending value through the inflation-adjusted return calculator.
Frequently asked questions
What is dollar-cost averaging?
Dollar-cost averaging means investing a fixed amount on a fixed schedule, such as $500 on the first of every month, whatever the market is doing. The fixed dollar amount buys more shares when prices are low and fewer when prices are high, so your average cost lands below the average price.
Is dollar-cost averaging better than investing a lump sum?
On average, investing a lump sum immediately wins, because markets rise more often than they fall and money sitting in cash earns less. Dollar-cost averaging wins in the scenarios that scare people most, the ones where the market drops right after you invest, and it is far easier to keep doing.
What return should I assume?
Use something you can defend rather than something you hope for. Many long-horizon plans use 6% to 8% nominal for a diversified stock portfolio and less for a mixed stock and bond allocation. Run the calculator twice, once with your base case and once two points lower.
Why does the calculator compound monthly?
Because your contributions arrive monthly, so each one earns for a different length of time. The monthly rate is derived from the annual rate you enter, as the twelfth root of one plus the annual return, so the compounded annual result matches the figure you typed.
Should I increase my contribution each year?
Raising the amount in line with your pay is one of the few levers that moves the ending value as much as the return assumption does. Set the annual increase to 3% and watch what happens to the final figure, since the early increases have decades left to compound.
Does this account for fees and taxes?
No. Enter a return that is already net of fund fees, or run the expense ratio calculator to see what a fee costs over the same period. Taxes depend on the account type, and inside a 401(k) or IRA the growth shown here is not taxed until withdrawal.