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Lump sum or dollar-cost averaging?

Enter how much you will invest, how many months you would spread the purchases over and what the waiting cash earns. The calculator compares the final value of both strategies and the average cost in rally, decline and recovery scenarios.

Educational simulation. Not investment advice. Results are estimates based on the data you enter and do not replace advice from a qualified professional.

Reviewed on Nov 1, 2026

Example: $30,000 to put into a stock fund: all today or $2,500 a month for 12 months?

The investment

Use the after-tax yield of a savings account or money market fund you could withdraw from any day.

Price scenario

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Share price and average cost

Monthly price in the chosen scenario, the price paid with a lump sum and the average cost of the monthly purchases.

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Value of each strategy month by month

Lump sum: everything invested in month 0. Monthly: shares bought so far plus the cash still waiting, with interest.

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Difference in each scenario

Final value of monthly purchases minus the lump sum. Above zero, spreading out won.

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Scenario comparison

Same amount, time frame and cash rate; only the price path changes.

Month by month in the chosen scenario

Purchase at the start of each month; cash earns interest until the next purchase.

Next step

Take this page’s results to another calculator with the fields already filled in.

Project the investment with compound interest →Track the average cost of your purchases →

The summary lists your inputs, results, formulas, assumptions and sources. The full report also includes the charts and interpretations, in color. In the print dialog, choose Save as PDF.

Method, assumptions and sources

Formulas

Lump sum: shares = total ÷ P₀; value at month N = shares × P_N
Monthly: a = total ÷ N; in month k buy a ÷ P_k shares; cash_(k+1) = (cash_k − a) × (1 + i_cash); value = Σ shares × P_N + cash
Average cost = total ÷ Σ shares; monthly rates = (1 + yearly rate)^(1/12) − 1
Scenarios: trend P_k = P₀(1 + r)^k; linear rally/decline of X% by month N; V and Λ: X% by month N/2 and back to P₀ at month N

Assumptions and limits

  • Teaching scenarios, not forecasts. No taxes, commissions, fund fees or dividends; cash earns the rate entered (after tax). Values compared at month N, one month after the last purchase.
  • Compare with research on lump sum versus dollar-cost averaging, which finds the lump sum ahead in most historical periods when stocks beat cash.

Official sources and references

Frequently asked questions

What is this calculator for?

It compares two ways to invest a sum in stocks or funds: all at once or split into equal monthly purchases, with the money that waits earning a low-risk rate. It shows the final value of each strategy in five price scenarios.

How do I read the example result?

With $30,000, a $50 share price and an 8% yearly return, the lump sum ends month 12 at $32,400. Split into 12 purchases of $2,500, with the cash earning 4.5%, it ends at $31,908: the lump sum is $492 ahead in the trend scenario.

So is investing everything at once always better?

No. When the price falls, monthly purchases win: with a 20% decline, the lump sum ends at $24,000 and the monthly purchases at $27,152. Lump sums tend to win on average when the investment earns more than cash, but no one knows the scenario in advance.

What is average cost?

The total invested divided by the number of shares bought. Because each monthly purchase is the same amount, you buy more shares at low prices, so the average cost ends below the simple average of the prices. In the 20% decline example, it is $45.23.

What rate should I use for cash?

The after-tax yield of a low-risk account you can withdraw from any day, such as a high-yield savings account or a money market fund. When rates are high, the cost of waiting is smaller.

How many months should I spread it over?

Very long periods leave money idle longer and raise the chance of missing gains. Many investors use 6 to 12 months. Try different periods in the calculator and see how the difference changes in each scenario.

When should I talk to a professional?

Before investing a large sum, consider talking to a fee-only adviser about risk tolerance, taxes and diversification. The scenarios here are for teaching and do not predict markets; past performance does not guarantee future results.

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Lump sum or dollar-cost averaging: which earns more

Got a sum of money at once (a bonus, a home sale, an inheritance) and want to invest it in stocks or funds? The classic question is whether to invest everything today or spread it over monthly purchases to avoid buying at the top.

When the lump sum wins

If the investment earns more than the account where the money waits, investing everything today keeps the money working longer. In the example, $30,000 in an investment earning 8% a year becomes $32,400 in 12 months; split into 12 purchases with the rest earning 4.5%, it ends at $31,908, $492 less.

When spreading out wins

If the price falls during the period, the monthly purchases catch lower prices. With a 20% decline, the lump sum ends at $24,000 and the monthly purchases at $27,152, with an average cost of $45.23 against $50 for the lump sum. In a dip followed by a recovery, the advantage of spreading out is even larger ($34,103 against $30,000).

Average cost

Because each purchase is the same amount, you buy more shares when the price is low and fewer when it is high. That is why your average cost sits below the simple average of the prices over the period.

How to decide

No one knows the scenario in advance. Spreading out works like insurance against regret: it costs a little when markets rise and protects a lot if prices fall right after you buy. Short periods, 6 to 12 months, balance the two.