Dollar-cost averaging vs. lump sum

Dollar-cost averaging (DCA) means investing a fixed amount at regular intervals — say, every month — regardless of the price that day. When prices are low your fixed amount buys more units; when prices are high it buys fewer.

It's how most people already invest without thinking about it: a set amount out of every paycheck into a retirement account.

Lump-sum investing puts a whole amount into the market at once. Because markets have tended to rise over long stretches of history, lump sum has often ended ahead of DCA on average.

The catch is timing risk: investing everything right before a downturn exposes the full amount to that drop, which can be hard to stomach.

DCA generally gives up a little expected return in exchange for a lot less timing risk and emotional stress. Spreading the entry out smooths the ride.

There's no universally correct answer. It depends on how much money you have to invest, over what horizon, and honestly on how you'd react to watching the market fall right after you invested.

The latte and delivery calculators simulate investing a small amount every month — which is dollar-cost averaging — because that mirrors how a recurring habit actually converts into investing.

They replay the real S&P 500 total-return history month by month, accumulating units at each month's actual index level.

All of this rests on past data. Markets can and do fall for years at a time, and the start and end of your window change the outcome dramatically.

Treat any backtest — including ours — as a way to build intuition, not as a plan or a promise.