What is dollar-cost averaging?

Investing a fixed amount at regular intervals regardless of price. Because the fixed amount buys more shares when the price is lower and fewer when it is higher, the average cost per share differs from the average of the prices themselves.

Why is my average cost lower than the average price?

A fixed contribution buys more shares at low prices, so those cheaper purchases carry more weight. The result is the harmonic rather than the arithmetic mean, which is always lower when prices vary.

Does dollar-cost averaging guarantee a better result?

No. It removes the need to time entries and smooths the cost basis, but in a steadily rising market investing earlier would have produced more. It is a method of contributing, not a way to avoid loss.

Dollar-Cost Averaging Calculator

Invest the same amount at each of a series of prices and see the shares accumulated, the average cost per share, and how it compares with the simple average of those prices.

Amount invested each time$Price at each purchaseSeparate with commas or spaces — 6 purchases detected. The last price is treated as the current one.

Average cost per share: $97.94
Simple average of the prices: $98.50
Shares acquired: 30.6323
Total invested: $3,000.00
Value at the last price: $3,369.55(+$369.55)

Your average cost is below the simple average of the prices because a fixed amount buys more shares when the price is lower. That is arithmetic, not an edge.

How this is calculated

average cost = total invested / total shares  (the harmonic mean of the prices)

total invested: the fixed amount multiplied by the number of purchases
total shares: sum of (amount / price) at each purchase

Worked example

Investing $500 at $100, $92 and $105 buys 15.20 shares for $1,500. That is an average cost of $98.71 — below the $99.00 simple average of the prices, because the fixed amount bought more shares when the price was lower.

Common questions

What is dollar-cost averaging?: Investing a fixed amount at regular intervals regardless of price. Because the fixed amount buys more shares when the price is lower and fewer when it is higher, the average cost per share differs from the average of the prices themselves.
Why is my average cost lower than the average price?: A fixed contribution buys more shares at low prices, so those cheaper purchases carry more weight. The result is the harmonic rather than the arithmetic mean, which is always lower when prices vary.
Does dollar-cost averaging guarantee a better result?: No. It removes the need to time entries and smooths the cost basis, but in a steadily rising market investing earlier would have produced more. It is a method of contributing, not a way to avoid loss.

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This tool performs arithmetic on the figures you enter. It is for informational and educational purposes only, is not investment, tax or financial advice, and is not a recommendation to buy, sell, or hold any security. Projections are assumptions, not forecasts. Always do your own due diligence.

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