Dollar-Cost Averaging Simulator
This simulator compares investing all at once (lump-sum) with spreading investments over time (dollar-cost averaging, or DCA). DCA can reduce the risk of investing at an unlucky moment — if prices fall after you start, later contributions automatically buy more shares at lower prices. But it may underperform lump-sum investing when markets rise on average, because cash held on the sidelines misses early gains.
Investment Parameters
12
12
Market Parameters
The two sliders below apply only to "Random returns."
0.50%
4.00%
Results Summary
Final lump-sum wealth
—
Final DCA wealth
—
Difference (LS − DCA)
—
Better strategy
—
Max drawdown — LS
—
Max drawdown — DCA
—
LS initial price
$100.00
DCA avg purchase price
—
Total Wealth Over Time
Lump-Sum
DCA (invested + cash)
Market Price Index
DCA Wealth: Invested vs. Cash
Invested
Cash
How to use this tool
- Select Rising market and click Resimulate several times. Notice how often lump-sum wins and by how much.
- Switch to Falling market and observe how DCA limits losses by spreading purchases over the decline.
- Try Volatile sideways with high volatility and resimulate — results become highly path-dependent.
- Adjust the DCA contribution periods slider. Spreading over fewer periods moves DCA closer to lump-sum; spreading over more periods increases the timing-risk reduction.
Key lessons
- DCA reduces timing risk. By spreading purchases, DCA lowers the importance of the initial entry price — you are never all-in at a single unlucky moment.
- Lump-sum tends to win in rising markets. When expected returns are positive, getting money invested earlier captures more compound growth. The cost of sitting in cash is real and, on average, negative.
- DCA is a risk-management and behavioral strategy. It can reduce regret and the variance of outcomes, but it is not a guaranteed return-enhancing strategy. Its value is greatest when markets are uncertain or expected to decline.