Regular investment

stuckinazoo

I was about to set up an AJ Bell monthly investment of £25 in government bonds to balance out a riskier lump sum and others I might make in the future. But a charge of £1.50 every month is making me think twice. Should I just hang on to my money and invest quarterly for example? And are regular investments generally better suited to 1. other providers and/or 2. serious amounts of say £100/month upwards.

ValiantSon

Other platforms are available which don't charge trading fees. Have a look on Monevator for a comparison.

rathernot

You'd be paying them 6% just in trading fees so what return would you expect to receive?

capital0ne

stuckinazoo wrote: »

I was about to set up an AJ Bell monthly investment of £25 in government bonds to balance out a riskier lump sum and others I might make in the future. But a charge of £1.50 every month is making me think twice. Should I just hang on to my money and invest quarterly for example? And are regular investments generally better suited to 1. other providers and/or 2. serious amounts of say £100/month upwards.

At this level of 'investment' you may as well just save the money in a 3% bank account.

stuckinazoo

Maybe I should have mentioned this is my lifetime ISA so expect to be contributing for 17 years. We need to take into account my 25% bonus on this contribution and probably a lump sum towards the end of each year.

rathernot

stuckinazoo wrote: »

Maybe I should have mentioned this is my lifetime ISA so expect to be contributing for 17 years. We need to take into account my 25% bonus on this contribution and probably a lump sum towards the end of each year.

Honestly, it's just a numbers game.

If you're paying 6% of £25 to put £25 in your LISA you have to make 6% back just to clear your trading costs.

Respectfully I wouldn't be paying £1.50 to add just £25.

Put the £25 in a savings account and drop in the lump sum at the end of each year IMO.

grey_gym_sock

rathernot wrote: »

Put the £25 in a savings account and drop in the lump sum at the end of each year IMO.

that's exactly the right answer ... according to an excessively pedantic formula, which i explained on a recent thread.

the formula, for the optimal number of times to invest per year, was:

SQRT(0.5 * i * r / c)

where

i is the total amount invested per year ... which is 12 * £25 = £300;

c is the cost of each investment ... viz. £1.50;

r is the cash drag rate, i.e. what rate of return you lose by not being invested sooner ... assuming gilts have an expected return of 2%, and you can get about 1% in a savings account, then the cash drag rate is the difference, 1%, or 0.01

so that gives

SQRT(0.5 * 300 * 0.01 / 1.50)

which equals 1, meaning 1 investment per year.