Dollar-Cost Averaging Calculator

Dollar-Cost Averaging (DCA), also known as a Systematic Investment Plan (SIP), is a popular investment strategy in the US where you invest a fixed amount in securities at regular intervals, typically weekly, monthly, or quarterly. This disciplined approach helps build wealth over time through consistent contributions, regardless of market conditions. DCA works by automatically buying more shares when prices are low and fewer when prices are high, potentially reducing your average cost per share over time.

DCA is a cornerstone of US retirement planning, commonly used in 401(k)s, IRAs, and other retirement accounts. When you contribute a fixed amount from each paycheck to your retirement accounts, you're using DCA. Many Americans also use this strategy for non-retirement investments through automated investment platforms ("robo-advisors") or traditional brokers, often starting with as little as $50-100 per month.

For retirement accounts like 401(k)s and IRAs, the investment horizon typically extends until retirement age. For other financial goals, most financial advisors recommend maintaining systematic investments for at least 3-5 years to benefit from market cycles. The power of compound growth becomes more significant over longer periods, which is why many Americans maintain their DCA strategy through their entire careers.

In the US market, you can apply DCA to various investment vehicles: 1) Mutual funds, including target-date retirement funds, 2) Exchange-Traded Funds (ETFs), which often have lower fees than mutual funds, 3) Individual stocks through direct stock purchase plans (DSPPs) or fractional share investing, 4) Bonds and bond funds, and 5) Balanced funds that combine stocks and bonds. Many brokers offer automated investing features to facilitate DCA into these investments.

Yes, most US brokers and investment platforms offer flexible DCA options. For non-retirement accounts, you can typically adjust your investment amount or pause contributions at any time. For 401(k)s, you can modify contribution percentages during your employer's open enrollment periods or when allowed by your plan. Many platforms also offer automatic contribution increase features to help you boost your savings rate over time, similar to auto-escalation in 401(k) plans.

The US market offers several automated investment approaches: 1) 401(k) payroll deductions for workplace retirement plans, 2) Automatic IRA contributions from your bank account, 3) Robo-advisors that automatically invest and rebalance your portfolio, 4) Dividend reinvestment plans (DRIPs) for stocks, 5) Automated mutual fund or ETF investment plans through brokers, and 6) Smart automatic transfer features that invest excess cash from your checking account. Many of these options have low or no minimum investment requirements.

The calculator uses the compound growth formula commonly used by financial advisors: M = P × ({[1 + i]^n – 1} / i) × (1 + i), where M is the future value, P is your periodic investment amount, n is the number of payments, and i is the periodic rate of return. For example, investing $500 monthly for 30 years with a 7% annual return (average historical US stock market return adjusted for inflation) could grow to approximately $567,000. This helps you plan for retirement or other long-term financial goals.