With dollar-cost averaging, you can spread out that investment. He receives a paycheck of $1,000 every two weeks. When shares are cheap, you might pay $2,500 and buy 200 shares. There's a neat little investment trick designed to limit your risk if you want to put a big chunk of money into a single stock. ). This is a simple calculator which answers the question: "If I'm dollar cost averaging my investment purchases, how often should I buy in order to minimise fees while not wasting too much potential return?" Dollar-cost averaging results in lower average costs when the stock price is in a downward trajectory (as in the example). But if the price rises in the third quarter, you could use your $2,500 and buy just 80 shares. Following is an average down stock formula that shows you how to calculate average price.. Average Stock Formula Dollar Cost Averaging (DCA): The act of investing all of your available money over time. However, the typical approach is equal-sized payments over a specific time period (i.e. Imagine you had $10,000 (or $1,000 per month for 10 months – large sums are not required, it’s just easier math) to put into your investment account. Dollar-cost averaging means investing the same amount of money in an asset (stocks) at periodic intervals irrespective of its price thereby reducing the risk of price volatility in the market. For example, an investor would invest $100 every month on the first day of the month for five years in a particular mutual fund. If you have Android device, you can find the average cost of your stock purchases with the average cost basis calculator which you can install for free. Dollar Cost Averaging Calculator 0 comments. The main advantage of averaging down is that an investor can bring down the average cost of a stock holding quite substantially. Joe works at ABC Corp. and has a 401(k) plan. This is what the dollar-cost averaging formula looks like: If Jeff had invested the entire $3,000 in Month 1, he would have owned 120 shares. Dollar-Cost Averaging Definition. A Dollar Cost Averaging Calculator Is Not Just For Mutual Funds NOTE : This calculator can be used on any investment for which you can project an average annual return (e.g., mutual funds, exchange traded funds, certificates of deposit, savings accounts, money market accounts, savings bonds, etc. Average Cost Basis Calculator. Of course, dollar cost averaging will win if your start date falls right before a dramatic crash (like October 1987) or at the start of an overall 12 month slump (like most of 2000). How you decide to invest these funds over time is up to you. For instance, you could invest $2,500 every three months. Using dollar-cost averaging, his $3,000 purchased 140 shares. one payment a month for 12 months). Joe decides to … Real World Example of Dollar-Cost Averaging . 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