How To Dollar-Cost Average Calculator
Dollar-cost averaging is the discipline of investing a fixed amount on a fixed schedule, whatever the market is doing. It replaces a timing decision with a calendar.
Portfolio value
$44,730.08
- Total invested
- $31,000.00
- Growth
- $13,730.08
- Value per £1 invested
- 1.4429
- Contributions made
- 120
- Monthly return
- 0.005654145387
Values update as you type. This calculator covers the single scenario its formula assumes — see Common Mistakes for what it leaves out.
The formula this calculator uses
value = initial x (1+r)^n + payment x ((1+r)^n - 1) / r
- P
- Initial lump sum invested at the start
- A
- Amount invested each period
- r
- Return per period, monthly rather than annual
- n
- Number of periods, in months
How to check the result by hand
- 1
Convert the annual return to a monthly one
Take the twelfth root of one plus the annual rate and subtract one. Dividing by twelve understates the monthly rate and understates the final value.
- 2
Count the periods
Multiply the number of years by twelve. A ten-year horizon is 120 contributions, and the count drives the compounding far more than the return does.
- 3
Project the initial lump sum
Multiply the starting amount by one plus the monthly rate raised to the number of months. Every month of the horizon compounds it.
- 4
Project the stream of contributions
Use the annuity formula, then multiply by one plus the monthly rate if the contributions are made at the start of the month rather than the end.
- 5
Separate growth from investment
Subtract the total contributed, which is the lump sum plus every payment, from the final value. The remainder is growth, and it is the part that grows with time.
For worked examples, common mistakes and the limits of this formula, read the full How To Dollar-Cost Average page.