Drip-Feed or Lump-sum?

Thrugelmir

Time in the market is more important than timing the market.

Though investing needs to be undertaken in a cost effective manner.

talexuser

Prism wrote: »

Agreed, though CapitalOne makes it sound like they are purposely holding back 20k until April each year so they can invest in a lump sum. Drip feeding would surely be more efficient

He specifically said he maxed out his ISA on the first day of the new tax year. Therefore there is nothing else left to hold back or drip feed.

Prism

talexuser wrote: »

He specifically said he maxed out his ISA on the first day of the new tax year. Therefore there is nothing else left to hold back or drip feed.

So nothing earned all year until 4th April when suddenly there is 20k invest the next day? I would argue that someone who has 20k ready to go every April can afford to invest at other times during the year using vehicles that are not ISAs.

darkidoe

See the way I think about this is by historical evidence, on average lump sum investing will tend to result in better outcomes then drip feeding for a lump sum. So if you have lump sum available, then its a no-brainer (assuming you have an long term investor mindset, you have emergency fund and job security and all that covered)

However when deciding whether regularly monthly income should be invested as soon as it comes in is just an arbitary decision. The cost of regular investing comes into play and also how likely it is for you to 'tempt' you to become overly concerned/active with your portfolio (unless you use an automatic trade feature).

You could perhaps set dates in the calender, either quarterly, twice a year or annually, where you review your finances and shift all excess cash into investments, regardless of amount. I think the best way to approach this is to set up a set of rules as to when you invest and stick to it.

For me, I just invest annually whenever I reach the ISA subscription limit. I feel more regular trades makes me feel too active. It is probably not the most efficient way, but it is suitable for me.

MK62

It depends on your goals - drip feeding offers better downside protection if markets move down, but at the cost of some upside if they move up.
Just saying that "history shows"....well that's kind of a similar argument as to why someone would go with a mixed asset fund when history shows a 100% equity fund offers a better outcome more often.

Basically, dripfeeding is diversifying the timing risk, but as with any diversification method, while it can reduce losses, it also has the potential to reduce gains in exchange for that reduced risk (and the primary reason for any diversification is to reduce risk).

Personally, at my stage of the investment journey, not losing money is more important than maximising gains, so I'm in the dripfeed camp......(or "pound cost averaging"....it sounds cooler.... )

Bravepants

I drip feed into my ISA monthly, simply because my salary is drip-fed into my bank account monthly too!

Thrugelmir

I've set a minimum investment limit of £3k for investing new monies and dividend/interest income received. Building a holding in a new investment trust or individual share needs to be undertaken in a meaningful way.

coastline

April has been good.

https://qph.fs.quoracdn.net/main-qimg-66079b8402a4e4f140a654f2b43001e7

https://www.moneyobserver.com/news/stockmarket-april-best-month-uk-equities-1970

http://stockmarketalmanac.co.uk/category/month-effects/

https://charts.equityclock.com/ftse-100-index-seasonal-chart

https://charts.equityclock.com/dow-jones-utility-average-seasonal-chart

talexuser

Prism wrote: »

So nothing earned all year until 4th April when suddenly there is 20k invest the next day? I would argue that someone who has 20k ready to go every April can afford to invest at other times during the year using vehicles that are not ISAs.

Well that's obvious, but not the o/p subject.