When to add lump sums to index trackers?

ChopperST

Would appreciate some advice from some of the more experienced investors on here.

I am currently invested in a S&S ISA with Fidelity with various index funds namely;

HSBC American Index
HSBC FTSE All Share
HSBC Pacific Index
HSBC European Index
HSBC Japan Index

I contribute via a monthly savings plan equally to each fund every month. I currently hold no bonds as my timescale to draw down is approximately another 32 years and I am happy to be 100% in equities for the moment.

With the end of the tax year looming I still have some allowance left in my ISA and have some funds which I have held in cash savings. In view of the recent losses of most of the major indices I was wondering whether to top up my monthly contributions with some lump sums to make the most of my allowance before April.

I appreciate this is somewhat going against the grain of passive investing but with an allowance still left to use and markets on the decline over the last few days I was wondering what those of you who have been investing over a much longer time scale would do?

Do I simply increase the monthly contributions over the next 2-3 months to spread the remaining allowance over a longer time span or split the money now and buy in 5 lump sums according to my target allocation and use this as a rebalancing opportunity?

Hope this makes sense.

jimjames

Personally I would increase the monthly investments for the next few months. There is as much chance of the markets dropping further as there is of them increasing so if you buy now they may go up or down by April. Increasing the monthly amount takes out the timing element.

ChopperST

Thanks. It sticks with the whole ethos of passive investing so I'll go along with that.

SnowMan

Remember that from 9th February it will only be possible to invest new money in clean share classes with Fidelity.

So worth making sure that any regular contributions into dirty classes (the continuation of which don't count as new money) are up and running before then.

Because the HSBC clean share class trackers are 0.1%pa cheaper than the dirty class you are paying an effective platform charge of 0.1%pa. That will have to change before April 2016, but worth doing in the meantime.

If you end up having to go clean by not sorting this in time you will end up paying 0.35%pa platform charge rather than 0.1%pa.

ChopperST

Thats an excellent point Snowman, I hadn't looked into the RDR too much but this makes alot of sense.

It also then begs the question that if I modified my monthly savings plan after the 9th Feb would that trigger a change in the platform charge? I generally increase my contributions in April in line with the previous years inflation figures and my annual wage increase.

SnowMan

ChopperST wrote: »

It also then begs the question that if I modified my monthly savings plan after the 9th Feb would that trigger a change in the platform charge? I generally increase my contributions in April in line with the previous years inflation figures and my annual wage increase.

Yes that would trigger a change.

https://www.fidelity.co.uk/investor/funds/fund-charges/charges-questions.page

From when will bundled funds be unavailable for new investment?

• For ISA, Investment Fund, Junior ISA and Fidelity SIPP accounts: 9th Feb 2014
• Standard Life SIPP: 6th April 2014

I have a Monthly Savings Plan. Can this continue into the bundled share classes in which I currently invest?

Yes, you can continue your MSPs into bundled funds. If you wish to amend the MSP, the options are to remove bundled share classes, add new clean share classes and update monthly amounts for clean share classes.


Can I increase/decrease the monthly contribution into an existing bundled share class.

No. You will need to invest the increased amount into a clean share class. While you can remove bundled share classes from the MSP, if you wish to reduce the amounts you will need to remove the bundled funds and add clean share classes with the reduced contribution.

ChopperST

Thanks Snowman - I'll have a good read through as I hadn't considered any of these points.

ChopperST

Spoken with Fidelity who confirmed all the above.

Plan of action is to increase my MSP to factor in the remainder of my allowance and a nominal inflationary increase.

I'm also going to buy the HSBC UK Guilt fund so its held on the old charges and contribute the minimum per month to keep it ticking over on the old platform. Perhaps this is a sign telling me I should have a small bond allocation and there are rocky roads ahead...

IronWolf

The best thing to do is invest it all in a big lump sum just before the market goes up

ChopperST

Next weeks Euromillions numbers would do just fine thanks Ironwolf.