ISA contributions

berbatov10

Is it best to put a straight £15K into and ISa or to drip feed it over a course of 12 months???

bowlhead99

This question comes up every week it seems.

Assuming you mean S&S ISA right?

You are investing because you think what you are investing in is going to go up over time. Therefore, mathematically you should put it in as soon as you have it available so that it gets the most 'going up over time'.

Some people are more cautious and want to drip feed, thinking if the market goes down they will buy cheaper. But when the market goes up they are buying more expensively than they could have bought on day one AND they are missing out on half a year's worth of dividends because the money is only half invested, on average.

Basically if you have £1000 available but let your balance gradually get invested over time so you go cash 1000 investment 0, cash 900 investment 100 and so on for a year or so up to cash 0 investment 1000... the returns you get for that year are the average of having 1000 in cash and 1000 in investments. You can't lose as much money and you can't gain as much money. Generally in the long run we all know that you make more money from investments than cash, even though there are down periods. The overall much better returns are the rewards for taking the risk and so if you don't take those risks, in favour of hanging back in cash, you will not get the rewards.

If you are cautious, select less risky investments. If you put £15000 into the market every April for the next 20 years you have still "drip-fed" it over time and all the little ups and downs can be ignored.

I'm assuming you mean S&S ISA and not cash ISA. If you mean cash ISA the answer is don't put any in, because rates are dire - current accounts pay better.

berbatov10

Thanks Bowlhead. You will see I have posted on a few topics recently which you have kindly contributed to. As you can see Iam trying to get my finances straight. I have the funds to invest £15K in April and rather than put VLS 60/40 in my pension as I was planning thought I would commit my ISA funds to it. Your thoughts are welcome

berbatov10

Anyone care to comment I value your opinions

jimjames

If you want the money in the market so it can start growing then put it in one go.

If you don't have the lump sum then put it in monthly.

Putting £15000 in now means you can use this years ISA allowance and have next year's available if you need it.

masonic

Drip-feeding is best treated as insurance against unlucky timing when putting a lump sum into the market and not continuing to invest more moeny. It comes at a cost, which is that more often than not simply investing the lump sum will lead to better results. There are some statistics and a discussion here.

If you are putting in £15k per year, then you will in effect drip feed anyway (just annually instead of monthly), so it makes sense to do so as early as possible.

berbatov10

I have covered this years ISA £15K already so am thinking ahead to April, the market may even look different by then but sounds the lump is best way to do it

TH1878

I could make a convincing argument both ways but with markets high, why don't you invest half of the allowance and drip feed the remainder in?

berbatov10

TH1878 if I was more confident had more time to research and follow investments I may be more adventurous and look outside the FTSE/UK as it is as you point out high at the moment and there may well be better value elsewhere. That said I think as we are in growth and ahead of europe I think/hope the downside is less likely

jimjames

TH1878 wrote: »

I could make a convincing argument both ways but with markets high, why don't you invest half of the allowance and drip feed the remainder in?

The US might be but by many measures the UK market isn't overvalued.