mini shares isa lump sum vs monthly

ard123en

Hi All

for the past to years ive maxed my isa allowance out 3k cash 4 k mini shares

the first year I paid a monthy amount into the mini shares isa and spread the allowance over the year and it appeared to do well

this year I had the full amount and put 4k in in april the fund appears to have only gone down since then

Im not the sort of person to panic and draw the money out and expected the see the fund go down as well as up

my question is this

If I had stuck to my intital plan of paying monthly would I of

a. ironed out some of the downturn in the market and therefore

b. take more of an advantage of the market when it goes back up

what im after is peoples thoughts on monthly vs lumpsum at the start of the tax year

my gut feeling is that since this is a long term investment for me as part of my pension plan (at least 20 years ) it wont make any/little difference

Debt_Free_Chick

By paying monthly, all you can be sure of is that you don't suffer the full downturn on the whole year's investment.

However, if prices had shot up since April, then you would only have seen that increase on the amount you invested in April i.e. one month's contribution, not the whole year.

Monthly contributions work best in falling markets. Lump sums work best in rising markets.

In the long-term, there's unlikely to be a huge difference, especially given the restrictions on the amount you can pay in.

Don't sweat it - it's done. Oddly enough, I usually invest lump sums and this year I've opted for monthly payments! Oh, well

dunstonh

With hindsight, monthly would have been better. However, you never know until after is happens which is best. The last 3 years until April, single premiums would have been better. So, in your case, you did it back to front by doing monthly when single was better then doing it single when monthly would have been better.

At the end of the day, these ups and downs happen and had you invested at the high point in 2001, before the crash, then you would still be up around 10-15% p.a. average with a half decent sector allocated portfolio.

cheerfulcat

my question is this

If I had stuck to my intital plan of paying monthly would I of

a. ironed out some of the downturn in the market and therefore

b. take more of an advantage of the market when it goes back up

what im after is peoples thoughts on monthly vs lumpsum at the start of the tax year

There is a fair amount of debate about " dollar [pound] cost averaging ", as it is called. If you Google, you'll find many articles from both camps. I am inclined to think that if you have a lump sum to invest it might as well go in in one.

baldbloke_2

I write as someone who only started down the investment ISA route in March.
I invested £4k at the time and then £4k in April and due to my inexperience/poor choices and bad timing I find my investments are now worth £7400!

I have thought long and hard about whether I was stupid to put in the lump sum rather than say £300+ monthly but I now feel that spread across (in my case) 4 funds it is all small beer really. By making the same investments in the years to come it will be drip-feeding but at a lesser frequency. I am fascinated to see how my investment stands this time next year.

I underestimated my aversion to risk and my reaction to the horror of watching my capital fluctuate so wildly has at least focused me very carefully on the criteria for choosing funds next time round.

It's bizarre realizing that today's valuation is only relevant for today - it's not like actually losing money - I still own the 'shares' and they will continue to have a higher or lower value day by day - as a basic commonsense saver it is hard to get my head around the fact that I have not actually 'lost' £600 - unless I needed that cash today.

Sorry I've strayed off your point! The others are right to say it's a matter of luck regarding monthly v lump sum. If you can afford the lump sum then even I would say choose that method for modest investments such as an ISA.

Phil

If you buy your shares monthly, do you not have to pay more in dealing fees?

Debt_Free_Chick

Phil wrote:

If you buy your shares monthly, do you not have to pay more in dealing fees?

With a fund (OIEC) you don't pay dealing fees, directly. The fees are paid by the fund, itself and reflected in the unit price and any charges.

Purely as an example Fidelity Special Situations has an initial charge of 1.25% within an ISA. So each transaction incurs a charge of 1.25% of the amount invested. It doesn't matter whether you invest £100 a month or a lump sum of £1,200 the total charge is the same - either 12 * £1.25, if you pay monthly, or £15 if you pay a lump sum - the total is £15, either way.

The annual management charge is usually included in the unit price i.e. it's not a separate charge, but the unit price is adjusted accordingly.

You may have a point if you are buying shares directly as some brokers have a minimum "per trade" fee. But for funds, it should not usually be an issue - but do check the T&Cs for the funds you intend to invest in.

nrsql

The lower you buy the more profit (or less loss) you will make.
So average the monthly purchase price and compare to the price at the time you would have bought and you will see which would have been best.

For the last few years I have done a lump sum but this year I was worried about the market and have not yet bought a share ISA - probably will do a monthly later rather than wait until the last moment.

It's very unlike me to get something like this right so I suspect something will go wrong with the timing. I'm just happy that my pep bought at the peak is finally in profit (just checked - still up).

Anyone else wish they had the nerve to day trade on the bounces going on at the moment?

cheerfulcat

Anyone else wish they had the nerve to day trade on the bounces going on at the moment?

Nope. Day traders generally lose money.