How dollar-cost averaging works
Dollar-cost averaging (DCA) means investing a fixed amount on a regular schedule. A fixed contribution buys more units when the price is lower and fewer when it is higher. Your return still depends on the prices you pay and the price at the end of the period.
A three-purchase example
Suppose you invest $100 at each of three purchases. The price drops from $100 to $50 and then returns to $100.
| Purchase | Price | Invested | Units bought |
|---|---|---|---|
| First | $100 | $100 | 1 |
| Second | $50 | $100 | 2 |
| Third | $100 | $100 | 1 |
You invested $300 and accumulated four units. At the final price of $100, those units are worth $400. The gain is $100 and the total return is 33.33%. If the third purchase happens at $50 instead, you end with five units worth $250 and a $50 loss.
Compare weekly and monthly investing
Keep the same price curve and duration, then adjust the amount per purchase so that the total contributions are close. A weekly schedule makes more purchases. Using the same amount per purchase gives it a larger budget and changes two variables at once.
- Choose weekly or monthly investing and a duration of one or two years.
- Set the amount per purchase and run the simulation.
- Check total contributions before comparing gains or total return.
Read the calculator results
The blue line shows the simulated price. Dots mark purchase days. The horizontal dashed line shows the total invested over the full period. Pale bars show the gain or loss as of each day, using the contributions made by that day.
Each purchase adds fractional units equal to the amount invested divided by the price. Final value is the total number of units multiplied by the final price. Total gain subtracts total contributions from final value. Total return divides that gain by total contributions. It is a simple return on contributions and does not annualize or account for the timing of the cash flows.
What the simulation includes
DCA Lab uses hypothetical prices. The price starts at $100 and the curve editor has a $10 floor. Purchases start on day one and repeat every seven days or at the start of each simulated month. The model includes fractional units and excludes dividends, fees, taxes, and currency conversion.
For more on the strategy, see the Investor.gov explanation of dollar-cost averaging.
Try the dollar-cost averaging calculator →