What dollar-cost averaging does
Dollar-cost averaging (DCA) invests a fixed amount on a fixed schedule regardless of price — $500 on the first of every month, rain or shine. When prices are high your $500 buys fewer shares; when markets fall it buys more. The mechanism quietly enforces the discipline most investors struggle with: buying more precisely when headlines are scariest.
The simulation compounds your balance monthly at the annual return you enter and adds each contribution at month's end. The chart's two lines — account value versus money contributed — tell the compounding story: early on they hug each other, and somewhere in the middle years the value line breaks away for good. Past year twenty, annual market growth routinely exceeds your entire year of contributions.
The honest lump-sum comparison
The fourth tile answers a question most DCA calculators dodge: what if you had invested everything on day one? Because markets trend upward, the lump sum usually wins — Vanguard's well-known study put it at roughly two thirds of historical periods. So if you are sitting on an inheritance or a bonus, the math side of the argument favors investing it now, while the sleep-at-night side favors spreading it over 6–12 months. Both are defensible; only you know which regret is worse for you.
For ordinary paycheck investing, the debate is moot — the money doesn't exist yet, so a monthly schedule is simply what investing looks like. The valuable habits are automating the transfer so no decision is required, and increasing the amount when income rises.