Pound cost averaging with shares with the least cost

mehman

Hi

I've inherited a fairly large sum that I'm considering investing into a variety of investments including shares, investment trusts, ETFs and OEICs. I've no debts or mortgage so I don't need to pay anything off.

However, rather than investing large lumps in the various places I would rather drip feed the money (via a S&S Isa) and try to benefit from pound cost averaging.

My question is what would be the best method to do this to reduce costs. I'm thinking of doing it on a monthly basis but this will soon get expensive due to brokerage charges. Are there any platforms out there that would suit me?

Thanks:)

zolablue25

There were some interesting posts recently (although I can't find them!) that disucssed the merits or otherwise of pound cost averaging when you had a lump sum to invest. Some kind soul linked to a Vanguard paper that crunched the numbers and the outcome was that you are better off 66% of the time just lumping the whole lot in at the beginning.

This is the paper I was referring to https://pressroom.vanguard.com/content/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf

mehman

zolablue25 wrote: »

There were some interesting posts recently (although I can't find them!) that disucssed the merits or otherwise of pound cost averaging when you had a lump sum to invest. Some kind soul linked to a Vanguard paper that crunched the numbers and the outcome was that you are better off 66% of the time just lumping the whole lot in at the beginning.

That's interesting thanks. My only concern really is the high valuations currently in equities and the possible bubble in the bond markets. I note that the article you gave uses the DCA method over a 12 month period. For myself it will be longer due to ISA limits.

TCA

Many platforms don't charge for fund purchases. Look for platforms with regular investing plans for shares and ETFs.

noggin1980

mehman wrote: »

That's interesting thanks. My only concern really is the high valuations currently in equities and the possible bubble in the bond markets. I note that the article you gave uses the DCA method over a 12 month period. For myself it will be longer due to ISA limits.

While that article focuses most on a 12 month period they also compared other lengths of time.

They conclude that lump sum investing beats drip feeding over a 3 year period in 90% of 10 year spans.

Of course they also say

"But if the investor is primarily concerned with minimizing downside risk and potential feelings of regret (resulting from
lump-sum investing immediately before a market downturn), then DCA may
be of use. Of course, any emotionally based concerns should be weighed
carefully against both (1) the lower expected long-run returns of cash
compared with stocks and bonds, and (2) the fact that delaying investment
is itself a form of market-timing, something few investors succeed at

So if that makes you more comftable go for it. remember to put some in your pension too.