Lump Sum vs DCA Calculator

How it is calculated

Both strategies are measured at the same end date, with one fixed return applied every month.

m = annual return ÷ 100 ÷ 12
Lump = A × (1 + m)H
DCA = Σ (A ÷ N) × (1 + m)H − i, i = 1…N

A is the total in dollars, N the number of monthly instalments, H the horizon in months (years × 12, rounded) and i the instalment number. The first instalment is treated as going in after month 1, so each slice grows for H − i months. Money not yet invested earns nothing. The last line is the lump sum minus DCA, so a negative number means DCA ended ahead. Because the return is a single constant rate, the lump sum wins whenever the return is above 0% and DCA wins when it is negative; the tool cannot model price swings. The DCA period must fit inside the horizon, the horizon can be at most 1,000 years, and the rate must be above −100%.

Common mistakes

• Entering the horizon in months. The field is in years, so 60 here means 60 years and a far larger balance.
• Setting the DCA period longer than the horizon. A 12-month plan with a 6-month horizon gives no result, because the schedule has to finish before the end date.
• Reading the result as a forecast of what the market will do. A single fixed return is assumed, so the lump sum always wins at a positive return; real markets fall in some years and DCA can come out ahead.
• Assuming the cash waiting to be invested earns interest. In this tool it earns nothing, which exaggerates the lump-sum advantage if your savings account pays a rate.
• Typing a loss as a positive number. A -10% year must be entered as -10; entering 10 compares two growing portfolios.