# What Is Dollar-Cost Averaging? Monthly vs a Lump Sum

> Dollar-cost averaging adds the same amount on a schedule. Here is how that compares with investing the whole sum up front at one rate.

Source: MarketCapLens — https://www.marketcaplens.com/learn/what-is-dollar-cost-averaging
Updated: 2026-09-22

Dollar-cost averaging means adding the same amount on a schedule, usually every month, instead of investing that whole sum on day one. The comparison answers one question: under a single rate you choose, which schedule finishes higher?

**Key takeaways**

- Monthly ending value grows each end-of-month contribution for the months that remain.
- The lump sum is the same total, invested at the start, grown for every month.
- $500 a month for one year at 8% ends near **$6,225**. The same **$6,000** at the start ends near **$6,498**.
- A constant positive rate favors the lump sum because every dollar has more time to grow. A falling price path can reverse that. This calculator does not model a falling path.

## The formula

> **Monthly ending value = contribution × ((1 + monthly rate) ^ months − 1) ÷ monthly rate**
>
> **Lump-sum ending value = (contribution × months) × (1 + monthly rate) ^ months**

The monthly rate is the annual return divided by 12. Contributions arrive at the end of the month.

## A worked example

Add **$500** at the end of each month for **1** year. The annual return is **8%**.

- Money in = $500 × 12 = **$6,000**.
- Monthly schedule ends near **$6,225**.
- Lump sum of $6,000 at the start ends near **$6,498**.

The gap is the extra growth from having the full amount invested for all 12 months. Run it in the [DCA calculator](https://www.marketcaplens.com/tools/dca-calculator). Change the rate and the gap changes. At a 0% return the two ending values match, because nothing is growing.

## What the comparison tells you

It shows the cost of waiting, when the return you typed is positive and steady. It is a schedule comparison, not a verdict about a stock.

## What the comparison leaves out

Real prices do not rise by the same fraction every month. If the price falls while you are still buying, later shares are cheaper, and the monthly schedule can finish ahead. This page cannot show that, because it applies one rate every period. It also ignores taxes, fees, and dividends.

A starting balance plus ongoing contributions — not a pure lump-sum comparison — belongs on the [compound growth](https://www.marketcaplens.com/learn/what-is-compound-growth) page. A live price, such as [Apple](https://www.marketcaplens.com/company/AAPL), is a snapshot with an as-of date. It is not this schedule.

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*For general education only. Nothing here is investment advice.*

## Frequently asked questions

### What is dollar-cost averaging?

It means adding the same amount on a schedule, usually every month, instead of investing that whole sum on day one. The MarketCapLens DCA calculator compares the two schedules at one constant return.

### Why can the lump sum finish higher?

When the return you type is positive and steady, every dollar in the lump sum is invested for the full stretch. $500 a month for a year at 8% ends near $6,225. The same $6,000 at the start ends near $6,498. A falling price path can reverse that. This calculator does not model one.