Dollar-Cost Averaging (DCA)¶
Dollar-cost averaging is an investment strategy in which a fixed dollar amount is deployed into an asset at regular intervals — weekly, monthly, or per paycheck — regardless of the asset's current price. Because the purchase amount is constant, each interval buys more shares when prices are low and fewer when prices are high. The result is an average cost per share equal to the harmonic mean of the prices paid, which is always at or below their arithmetic average.
HOW IT WORKS¶
For n purchases of $D at prices P₁, P₂, …, Pₙ, the average cost per share is:
Average cost = n · D / Σ(D / Pᵢ) = n / Σ(1 / Pᵢ)
This harmonic mean is the mechanical core of DCA. The gap between the harmonic mean and the arithmetic average price widens as volatility increases, meaning DCA's cost-reduction effect is largest in choppy or declining markets. That advantage disappears if the asset does not recover — averaging into a structurally declining position only accumulates a larger loss. Lump-sum investing historically outperforms DCA in roughly two-thirds of 12-month rolling periods, so DCA on an existing lump sum is a risk-reduction choice, not a return-maximization one.
IN TAPEBOARD¶
The Tapeboard portfolio tracker displays your average cost basis per position, updated automatically after each recorded purchase. When you log recurring buys — from a broker import or manual entry — Tapeboard plots each lot on the position's price chart so you can see exactly where shares were accumulated relative to the current price. The Performance panel shows your effective average cost against the asset's price history, making it straightforward to measure how much the harmonic-mean effect has reduced your basis during drawdown periods.