The DCA projection
Investing $500 a month for 20 years at 8% annual returns builds to roughly $294,500 — on total deposits of $120,000. The formula is the future value of a monthly annuity: FV = payment × ((1+i)n − 1) ÷ i, with i the monthly return and n the number of months. Notice the split: growth ends up bigger than the contributions themselves, and every extra year on the horizon widens that gap.
DCA vs lump sum — the honest comparison
With a smooth positive return, the lump sum always wins on paper, because every dollar is invested longer. Vanguard's research on real market history found lump-sum investing beat 12-month DCA roughly two-thirds of the time. But the comparison only applies if you actually have the lump sum. Most people invest from each paycheck — which is DCA by necessity, and the right default. Where the choice is real (inheritance, bonus, sale proceeds), DCA is the insurance premium you pay against investing everything the week before a crash.
Why DCA works behaviorally
A fixed dollar amount automatically buys more shares when prices are low and fewer when they're high — mechanical discipline that removes the worst instinct in investing, which is waiting for it to "feel safe." The investors who succeed with DCA are the ones who keep the automatic buy running through the scary months; the strategy's whole value is that there is no decision to get wrong each month.
How to use this calculator
Enter the amount you'll invest each month, your time horizon in years, and a realistic annual return — 7-8% keeps a stock-portfolio projection honest. The calculator shows the ending value, splits it into contributions versus growth, and compares it against investing the same total as a lump sum on day one. Use the lump-sum comparison to settle the right question: if you're investing from each paycheck, you're doing DCA by necessity and it's the correct default. If you've received a windfall, the calculator shows what history favors (lump sum wins about two-thirds of the time) against the peace of mind of spreading it out. The most important setting isn't on the form — it's whether you keep the automatic buy running through the scary months.