Frequently Asked Questions
Is DCA better than lump-sum investing?
Statistically, lump-sum beats DCA about two-thirds of the time because markets rise more often than they fall. Vanguard's widely cited study found lump-sum outperformed by an average of 2.3% over 12 months. DCA wins on the behavioral side by reducing regret risk.
When does DCA make the most sense?
When investing earned income (you have no choice; that is the natural rhythm), when investing into volatile assets where a sharp drawdown would shake your conviction, or when behavioral risk of mistiming a lump sum is high.
What time horizon should I spread the deposits over?
Most advisors suggest 3-12 months. Longer than 12 months leaves too much idle in cash. Splitting a windfall across 6 monthly tranches captures most of the behavioral benefit.
Does automatic 401(k) contribution count as DCA?
Yes, and it is the purest form. Each paycheck buys whatever the market price is. The math of DCA actually helps a little because more shares are bought when prices are low (cost basis effect).
Provided by AllCalculators.io
Free online calculators for everyday. No registration required.
Estimates only. Not investment advice.
Investment Disclaimer: Estimates only. Not investment advice.
This calculator provides estimates for educational purposes only and is not investment advice. Past performance does not guarantee future results. Consult with a qualified financial advisor before making investment decisions. All investments carry risk, including potential loss of principal.