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Dollar (Pound) Cost Averaging Frequency
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Investor_ISA_DCA
Posts: 6 Forumite

Is there a maximum permitted frequency of depositing funds into an Investment ISA and subsequently purchasing a portion of an ETF for it to NOT count as "trading" by HMRC?
Thinking of setting up an "auto-invest" for an ETF with a daily purchase frequency.
Thinking of setting up an "auto-invest" for an ETF with a daily purchase frequency.
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Do you have free dealing for auto-invest? I've never come across this as an HMRC problem and I suspect if you aren't doiung a lot of selling as well as a lot of buying there's unlikely to be an issue, but it feels a bit inefficient if you're paying dealing charges to buy the ETF... daily purchase frequency on the full allowance means what, £54 per calendar day, £80 or so per working day?
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It would be judged on a case by case basis, but someone who is just using a regular investment plan (even with daily frequency), is unlikely to be at much risk in my view. It's intended to catch people who are attempting to earn a living from the activity.
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Dollar cost averaging is good at averaging out your buying price over the long term but as markets generally rise over time it's best to just invest the money into the markets as soon as you have it available (otherwise everyone would always be selling all their investments to dollar cost them back into the markets) so a frequency that somehow aligns to you getting access to the money e.g. shortly after your pay day is usually the preferred approach. No need to invest daily.1
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Thanks for all the replies! I guess the idea is that monthly purchase is better than annual, weekly better than monthly, daily better than weekly due to the power of compound interest. To be specific I am using Trading 212 Investment ISA, auto-invest and the product is the CSP10
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Is there any issue even if you were trading inside an ISA? I thought the whole point was that it was free of taxes?Remember the saying: if it looks too good to be true it almost certainly is.0
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Investor_ISA_DCA said:Thanks for all the replies! I guess the idea is that monthly purchase is better than annual, weekly better than monthly, daily better than weekly due to the power of compound interest. To be specific I am using Trading 212 Investment ISA, auto-invest and the product is the CSP1If that is the idea, then it is based on a false assumption. The best frequency for a purchase is the frequency in which the money becomes available. Most people are paid either monthly or weekly. "The power of compound interest" is greater the longer/sooner the money is invested.More frequent regular investment could have other legitimate uses, however, such as generating debit card transactions required to meet the criteria of bank incentives.0
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jimjames said:Is there any issue even if you were trading inside an ISA? I thought the whole point was that it was free of taxes?
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Trading is an occupation so it might attract an income tax.Regarding your concern, I know a few people who are trading (based on the number of trades they placed each week) under ISA and never have a problem with HMRC. So let alone you are just doing DCA on ETF.But when people are doing "a scalping" trading by taking advantage of infinitesimal movement of price of the same asset on the same day, you get the problem from Trading 212, as it is against their TCs, they might close your accounts.In the US there is what is so called the Pattern Day Trader (PDT) rule, a regulation set by the Financial Industry Regulatory Authority (FINRA), a trading governing body in the US, ‘to discourage people from trading excessively’. But this is only applicable to a margin account, not if you trade using your own money.
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