Same Amount Every Month: Why the Average Cost Comes Out Lower
Dollar-cost averaging means investing a fixed amount every month without watching the price. The key is that the same dollar amount automatically buys more shares when the price is low and fewer when it's high. As a result, your average cost per share, calculated as total invested divided by total shares bought, comes out lower than the simple average of the prices you paid. Since you're not trying to time the market, it also takes some of the psychological pressure off.
This calculator takes your monthly investment and three months of purchase prices to find your total shares bought, average cost per share, the savings versus a simple average, and your unrealized gain or loss using the most recent price as the current price. Try plugging in different price paths and you'll see why dollar-cost averaging shines when prices are volatile or trending down, and why the edge shrinks in a market that just keeps climbing.
The cost-averaging effect becomes most visible with recurring, long-term investing, like an automatic contribution into a fund or ETF, so the real payoff comes from sticking to a consistent schedule rather than judging results over a short window.
Frequently Asked Questions
Investing a fixed amount at regular intervals regardless of price. You buy more shares when cheap and fewer when expensive, lowering your average cost.
You buy more shares when the price is low. Total invested divided by total shares tends to be lower than a simple average of prices.
No. In a steadily rising market, investing a lump sum upfront can do better. DCA shines with volatility or a drawdown along the way.
※ This is a simplified 3-month model that excludes commissions and taxes. Results are estimates only.