Trying to decide between drip-feeding or investing a lump sum into S&S ISA

bluehydrangeas

I opened a stocks and shares ISA on Trading 212 last week. This is my first experience of investing. I read the beginners' investing guide on MSE and I have also been trying to learn more about it from other sources. At the moment I only have £200 invested in the S&S ISA. I currently have £10k which is simply sitting in a standard current account and accruing no interest. I am considering depositing a chunk of this (around £5k) into the S&S ISA. I already have various standard savings accounts, but these are only returning an average of around 5% interest. Several of these are "regular savers", where the interest rate declines significantly after having the account for a year. The relatively poor returns from traditional savings are what sparked my interest in investing.

Assuming I understand the risks of investing, is there any reason not to invest a lump sum at once, or is it better to invest smaller amounts on a somewhat regular basis? I am planning to invest for a minimum of 5 years. I am also planning to focus on investing in all-world ETFs. I currently have no plans to invest in individual companies as I feel that is too far beyond my level of investing knowledge or experience.

Albermarle

It is a common question.
The answer is that as stock markets go up in the long term, it is statistically better to invest the full lump sum today.
However you might be unlucky with your timing.
Markets have been doing very well recently, so you might want to take that into account.
There is a half way house where you say add 40% now, 30% in three months and the other 30% a bit later.

This is my first experience of investing. I read the beginners' investing guide on MSE and I have also been trying to learn more about it from other sources. 
These forums are a good source of info.

Also often forgotten is that many peoples pensions are invested, even if they do not always realise it.

poseidon1

bluehydrangeas said:

I opened a stocks and shares ISA on Trading 212 last week. This is my first experience of investing. I read the beginners' investing guide on MSE and I have also been trying to learn more about it from other sources. At the moment I only have £200 invested in the S&S ISA. I currently have £10k which is simply sitting in a standard current account and accruing no interest. I am considering depositing a chunk of this (around £5k) into the S&S ISA. I already have various standard savings accounts, but these are only returning an average of around 5% interest. Several of these are "regular savers", where the interest rate declines significantly after having the account for a year. The relatively poor returns from traditional savings are what sparked my interest in investing.

Assuming I understand the risks of investing, is there any reason not to invest a lump sum at once, or is it better to invest smaller amounts on a somewhat regular basis? I am planning to invest for a minimum of 5 years. I am also planning to focus on investing in all-world ETFs. I currently have no plans to invest in individual companies as I feel that is too far beyond my level of investing knowledge or experience.

An all world ETF is likely to have a significant USA bias.

 In your circumstances ( age 30s?), and inexperience of investment matters I would be inclined to drip feed the £10k into the markets at a monthly contribution level you feel you could sustain long after the  intial £10k has been exhausted.

ETFs with large USA components may possibly see a downward correction in the year to come. You can hopefully benefit from this via the concept of 'pound cost averaging' with monthly contributions, rather than committing the entire £10k upfront and witnessing a disconcerting fall in value of your investment early in your investing journey, which could psychologically put you off going forward.

saajan_12

Step 1: transfer the money to an easy access savings account today. Even an account paying 3% with your main bank would earn you around £1 a day, ie £10-20 if this takes you a couple of weeks to decide. 

Step 2: Decide what you want to invest in - if an all world, there are various ready made funds but with different splits between regions, emerging v developed, etc. Don't try to perfect the best return or an exact set of companies, but just something that looks balanced. 

Step 3: Decide how much. I'd keep an emergency fund and any money you need short term in a high yield savings account. On the rest, the question is do you want to minimise losses (eg if saving for a house deposit in the mid-term) or maximise gains (for long term)? 
Drip feed -> reduces the risk that you buy at the high, as you get the average price over a year instead. So minimises losses. 
Lump sum -> Money is invested for the longest time so on average, that will have the highest return. There is still the risk that you buy everything at the high or everything at the low. 

Albermarle

 The relatively poor returns from traditional savings are what sparked my interest in investing.

Although savings rates have come down a little they are still beating inflation, which is not bad for zero risk.
Pre Covid rates were only around 1 % !

Just to put things in perspective.

Northern_Wanderer

Theoretically you could open a Cash ISA and put the £10k in there (assuming you still have ISA allowance to use up for this tax year). Then do ISA transfers (not withdrawals) once a month into the stocks and shares ISA over the coming 12 months. Look up "Pound Cost Averaging" for your investments.