Drip Feed or Lump Sum?

patch9495

Hi Everyone,

During this lockdown/bear market I am looking at taking advantage of investing the money I would have under normal circumstances allocated to daily consumption/commuting costs.

Am I better to invest this all as one lump sum on a set date each month, or drip feed weekly to pick up units of different prices during this highly volatile period.

Investment will be long term so not looking to make a quick profit/loss

SFindlay

patch9495 said:

Hi Everyone,

During this lockdown/bear market I am looking at taking advantage of investing the money I would have under normal circumstances allocated to daily consumption/commuting costs.

Am I better to invest this all as one lump sum on a set date each month, or drip feed weekly to pick up units of different prices during this highly volatile period.

Investment will be long term so not looking to make a quick profit/loss

Depends on the sums of money you are talking about, who you will be investing through and what you're looking to buy??
For example most (if not all as I've never gone through them all) Vanguard funds bought through them require minimum £500 lump sum or £100 monthly DD so all.depends on daily consumption / commuting costs and what are you going to do once back to work and no longer have that money?? 

Notepad_Phil

Will the costs be the same for the different means of purchases? One of my platforms charges per purchase so for me it would be a lot cheaper to do it monthly, whereas Mrs Phil has a platform that has no charge for each purchase so it wouldn't make any difference.
 
Your platform may also have a minimum amount that you have to purchase.

If there is no charge and you meet the minimum amounts then it probably won't make much difference whether you save up over the month and do one purchase or purchase each week so just choose what is the easiest to do - but if there is a charge then doing it less often is likely to be the best way unless you're talking about contributing a lot.

P.s. historically putting the money in via a lump sum is usually the best, but that is where you have the money already and invest it in one go rather than breaking that lump sum up and investing it in smaller sums over a period of time. In your case putting the money in as soon as you have it would usually be the best, but that assumes zero charges on each purchase and as I say there would likely be a very small difference in the end result of investing weekly or investing monthly.

eskbanker

Perhaps a semantic point but the thread title should probably be 'Drip feed monthly or weekly?' - investing monthly is normally considered to be drip-feeding! 

Albermarle

eskbanker said:

Perhaps a semantic point but the thread title should probably be 'Drip feed monthly or weekly?' - investing monthly is normally considered to be drip-feeding! 

That is what I thought as well . Normally 'lump sum' refers to a one off payment , maybe once, twice or three times a year.
In the long term , weekly or monthly is unlikely to make any difference anyway.

george4064

Generally speaking you should invest as much as you can afford to as soon as possible, you should consider dealing costs into this too. For example lets say you get paid on last day of each month and of your payslip you can afford to invest £250, rather than simply placing an ad-hoc trade to invest that £250 with a dealing charge (if applicable) you would be better off setting up a regular investment plan (different platforms have slightly different names for this) to invest your £250 on the stated day of each month (normally around 10th day of each month, but ofcourse can vary between platforms).

csgohan4

Just wanted to check, for example Halifax one of the lowest fixed fee platforms, say you put in a regular £250 a month, would this count as their 'Scheduled regular investments' and therefore instead of the usual £12.5 to top up your fund you would only pay £2?  

Or would it better to put it all in a lump sum to save on dealing fees and put £250x12 all at once?

Also transaction fees seems quite high with quoted values of 0.5% is this correct? I see Halifax and Lloyds banking charge this rate in their charges documentation 

I am finding the other platforms such as HL are very expensive for what they are, especially if you only use them as a trading fund platform and know which fund/s you want to settle on

https://www.halifax.co.uk/investing/start-investing/share-dealing-services/stocks-and-shares-isa/?wt.ac=HalifaxInvestinghomepage/StocksandShares/ISA/Applybutton2

Eco_Miser

A regular £250 a month could be a 'Scheduled regular investment'.
The 0.5% charge is probably the stamp duty charged on purchases.
A big question is how much will you have invested. Some platforms eg HL  and Vanguard charge a percentage of your total holding, and no transaction fee. This can be cheap if you don't have much invested. Others charge a fixed fee plus a transaction charge. This can be cheap if you have a lot invested, especially if you put in a lump sum annually.
  See https://monevator.com/compare-uk-cheapest-online-brokers/  for a comparison list of charges.  

csgohan4

Eco_Miser said:

A regular £250 a month could be a 'Scheduled regular investment'.
The 0.5% charge is probably the stamp duty charged on purchases.
A big question is how much will you have invested. Some platforms eg HL  and Vanguard charge a percentage of your total holding, and no transaction fee. This can be cheap if you don't have much invested. Others charge a fixed fee plus a transaction charge. This can be cheap if you have a lot invested, especially if you put in a lump sum annually.
  See https://monevator.com/compare-uk-cheapest-online-brokers/  for a comparison list of charges.  

I assume the transaction fees apply even in a tax wrapper like ISA/ SIPP?

Say your able to invest 40k a year for the next 30 years, that 0.45% fee is looking to be eye watering sooner rather than later. Which is why I have been looking at the Halifax from that link and indeed monvevator guide which I recommend newbies like myself branching into investments

Eco_Miser

csgohan4 said:

Eco_Miser said:

A regular £250 a month could be a 'Scheduled regular investment'.
The 0.5% charge is probably the stamp duty charged on purchases.
A big question is how much will you have invested. Some platforms eg HL  and Vanguard charge a percentage of your total holding, and no transaction fee. This can be cheap if you don't have much invested. Others charge a fixed fee plus a transaction charge. This can be cheap if you have a lot invested, especially if you put in a lump sum annually.
  See https://monevator.com/compare-uk-cheapest-online-brokers/  for a comparison list of charges.  

I assume the transaction fees apply even in a tax wrapper like ISA/ SIPP?

Say your able to invest 40k a year for the next 30 years, that 0.45% fee is looking to be eye watering sooner rather than later. Which is why I have been looking at the Halifax from that link and indeed monvevator guide which I recommend newbies like myself branching into investments

Yes transaction fees apply everywhere, unless the platform waives them since it's taking a percentage of your holding.
Some people set up an ISA with a percentage fee platform to receive the regular monthly (or more frequent) investments, and after the start of each financial year, transfer the previous year's ISA to a platform with a fixed,  or even zero, fee.  Thus getting the best of both worlds.

dont_look_now

csgohan4 said:

Also transaction fees seems quite high with quoted values of 0.5% is this correct? I see Halifax and Lloyds banking charge this rate in their charges documentation

Halifax are presenting that information rather confusingly. It doesn't refer to charges made by Halifax, but to the internal transaction costs incurred within a fund (or another collective investment), so it will be the same cost regardless of which platform you buy the fund on. And 0.5% is just a "typical" figure, so it will actually vary, depending on which fund you choose to buy, and may well be nowhere near that figure.