How this is calculated
each month: balance = balance × (1 + rate/12) + monthly amount, repeated for 12 × years months
Dollar-cost averaging (DCA) means investing a fixed amount on a fixed schedule — say $300 on the first of every month — regardless of whether the market is up, down or terrifying. When prices are high your $300 buys fewer shares; when prices crash it buys more. The schedule quietly does what human nerves rarely manage: buying more when things are cheap.
The projection here compounds each contribution from the month it's invested. That has a counterintuitive consequence: your early contributions matter far more than your late ones, because they ride the compounding curve longest. The first year's $3,600 can end up worth more than the last five years' deposits combined.
DCA's real superpower isn't mathematical — research shows lump-sum investing beats DCA about two-thirds of the time when you already have the money. Its superpower is behavioral: it turns investing into a habit that survives crashes, headlines and moods. For money that arrives monthly (a salary), DCA isn't even a choice — it's just the sensible default.
Frequently asked questions
Is DCA better than investing a lump sum?
Statistically no — markets rise more often than they fall, so investing available money immediately wins roughly two times out of three. But DCA reduces regret and risk around bad timing, and for monthly income it's the natural approach anyway.
What return should I assume?
8% is between the S&P 500's long-run nominal average (~10%) and common conservative planning figures. Lower it to model bonds or cautious portfolios; no assumption is a promise.
Does the calculator include fees?
No. Low-cost index funds charge under 0.1% a year, which barely moves the needle; actively managed funds charging 1-2% can consume a large slice of the final value — subtract the fee from your return assumption to see it.
What happens if the market crashes mid-plan?
Historically, crashes mid-accumulation improved final outcomes for disciplined DCA investors — the fixed amount bought more shares at depressed prices. The projection here assumes a smooth return; reality is lumpier but the average is what compounds.