Dollar Cost Average (DCA) Calculator & Cost Basis Tool

Research from Vanguard shows that lump sum investing outperforms DCA roughly 68% of the time across global markets. This makes sense — markets trend upward over long periods, so getting money invested sooner captures more growth. However, DCA wins on risk-adjusted returns. If you invest a lump sum right before a crash, it could take years to recover. DCA spreads that risk across multiple entry points, reducing maximum drawdown by 30–40% on average. For most people receiving regular income, DCA isn't just a strategy — it's the natural way to invest.

Mathematically, the difference between weekly and monthly DCA is negligible over long time horizons. A study of S&P 500 data from 1926–2023 found that weekly DCA outperformed monthly DCA by less than 0.1% annually. The advantage of monthly investing is simplicity: it aligns with pay cycles, reduces transaction fees on platforms that charge per trade, and is easier to automate. Choose whichever frequency you'll stick with consistently — that matters far more than the interval itself.

DCA reduces risk through temporal diversification — spreading purchases across different market conditions. When prices drop, your fixed investment buys more shares; when prices rise, it buys fewer. This automatic "buy low" bias lowers your average cost per share compared to a random entry point. Additionally, DCA eliminates the psychological risk of buying at a peak, which causes many investors to panic-sell during downturns. By committing to a schedule, you remove emotion from the equation and let compounding work in your favor.

Dollar cost averaging (DCA) is the investment strategy — the disciplined act of investing a fixed dollar amount at regular intervals regardless of price. The weighted average cost basis is the mathematical outcome of that strategy. When you DCA into a position, each purchase occurs at a different price. The weighted average tells you the effective price you paid per share across all of those purchases, accounting for how many shares each buy contributed. Think of DCA as the process and the weighted average as the result. This calculator computes the latter — giving you the single number that represents your true entry price after multiple buys.

Value Averaging (VCA) is a more aggressive cousin of DCA. With standard DCA, you invest a fixed dollar amount each period — say $500/month regardless of market conditions. With VCA, you set a target portfolio value that increases by a fixed amount each period, then invest whatever is needed to hit that target. If the market drops, you invest more; if it surges, you invest less (or even sell). Academic research by Michael Edleson found that VCA typically produces a lower average cost per share than DCA because it forces larger purchases during dips. However, VCA requires more capital flexibility — in deep downturns you may need to invest 3–5x your normal amount. VCA also requires active monitoring, whereas DCA can be fully automated. For most investors, DCA's simplicity and consistency outweigh VCA's marginal mathematical advantage.