Drip feed or lump sum into S and S ISAs 26 August 2016 at 3:25PM edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings 4 replies 1.3K views

enthusiasticsaver

I am sure this question has been done to death but I thought it would be interesting to get other viewpoints on this. I have an S and S ISA which I have been investing 500 per month in over the last two years and also transferred a lump sum cash isa into.

We receive my OHs lump sum from his pension in November and we will be putting some of it in my ISA to use up the yearly allowance and also opening one for my OH and then put the full allowance into both next year also. Thereby a total of £55k over the next six months - £25k in November and the other £30k in April.

Is it worth putting the whole £55k in November and then bed and isa the £30k outside the ISA next April or drip feed the £55k in gradually from November to April? If we do not put it into investments in November it will sit in National Savings Income Bonds along with the rest of his lump sum while we decide what to do with the rest of it. Thereby it will earn 1% not a fortune but we already have the high interest current accounts and I do not expect we will keep it long term as we have other plans.

enthusiasticsaver

I should say we will not need to access the funds in the next five to ten years as my OHs pension should meet our essential expenditure and I am still working part time. Our high interest current accounts and regular savers plus a fixed term cash isa will cover our capital requirements and subsidise our income should I decide to retire early too.

stephenadarglas

Two things here.


If you invest the whole lot in one go you start to picking up the dividends in one go (assuming there are any). The downside is if we see a correction however you suggest you are for the long term.


Secondly, monthly drip feeding irons out those market corrections but you will have a substantial amount of cash hanging about earning next to nothing in interest in a cash account.


As always, in my opinion, it depends on your personal circumstances however I would invest in an equity income fund (accumulation units) such as Artemis Income and draw down from it monthly when you need to.

masonic

Unless you have changed your investments, your portfolio is already very diversified and medium risk, so the possibility of you being better off by drip feeding the money is quite remote.

The pension was presumably invested, so this isn't really isn't equivalent to investing a lump sum. It's closer to a transfer from one investment account to another via cash. Most people would be looking to minimise their time out of the market in a similar situation.

bigfreddiel

I read an article in the Sunday Times a few years ago where they tested lump sum investment just before a market correction and drip feeding. The lump sum investment worked out better.

Cheers fj