Euro-cost averaging (Durchschnittskosteneffekt)
Euro-cost averaging is the effect of investing a fixed euro amount at regular intervals: the same money buys more units when the price is low and fewer when it's high, so the average price paid per unit ends up at or below the simple average of the quoted prices. It is a mathematical property of fixed-amount purchases, not a strategy that guarantees a better return than any alternative.
Why it matters
Cost averaging is what happens automatically once a Savings plan (Sparplan) buys a volatile asset — a stock ETF (Exchange Traded Fund, a basket of securities tracking an index) rather than a fixed-interest account. Understanding it separates two different questions: "is my regular purchase mechanically averaging out price swings?" (yes, by construction) versus "does that make regular investing outperform other approaches?" (depends on how the price moves afterward, and cannot be known in advance).
Framing it correctly matters because the effect is easy to oversell. It smooths the price paid across ups and downs; it does not remove market risk, and it is not automatically superior to investing a lump sum immediately.
Worked examples
1. A falling-then-recovering price. €200 goes into the same ETF every month for four months, at prices of €50, €40, €25, and €50 per share.
| Month | Price per share | Shares bought (€200 ÷ price) |
|---|---|---|
| 1 | €50 | 4.00 |
| 2 | €40 | 5.00 |
| 3 | €25 | 8.00 |
| 4 | €50 | 4.00 |
Total invested: €800. Total shares: 21.00. Average price paid: €800 / 21.00 ≈ €38.10 — below the simple average of the four quoted prices ((€50+€40+€25+€50)/4 = €41.25). The dip in month 3 bought more shares than months 1, 2, or 4, pulling the average down.
2. A steadily rising price — the trade-off with a lump sum. Same €200 monthly amount, but the price rises each month: €20, €30, €40, €50.
| Month | Price per share | Shares bought (€200 ÷ price) |
|---|---|---|
| 1 | €20 | 10.00 |
| 2 | €30 | 6.67 |
| 3 | €40 | 5.00 |
| 4 | €50 | 4.00 |
Total invested: €800. Total shares: 25.67. Average price paid: €800 / 25.67 ≈ €31.17 — still below the simple average (€35), but well above the €20 price available in month 1. Investing the full €800 as a lump sum at that first price would have bought 40 shares, more than the 25.67 shares the spread-out purchases produced. Cost averaging lowers the average price relative to the period's own quoted prices; it does not guarantee a lower price than a single purchase made at the most favorable moment — a moment that is only visible in hindsight.
Check yourself
An investor puts €100 into the same ETF every month for 3 months, at prices of €10, €20, and €5 per share. What is the average price paid per share, in euros (round to 2 decimals)?
Which statement correctly describes why euro-cost averaging pulls the average price paid below the simple average of the quoted prices?
Select every statement below that is true about euro-cost averaging.