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The benefits of regular investing
Find out how regular investing can help you navigate market ups and downs.
When markets are volatile, it’s natural to feel cautious about investing and to want to keep more of your money in what feels like the safety of cash savings. However, when it comes to longer-term savings, such as pensions and individual savings accounts (ISAs), it’s worth thinking about whether cash savings will help you reach your financial goals. This is where regularly investing smaller amounts of money can really help.
By making regular payments into investments rather than putting in a large amount of money all at once, you’re buying fewer investment units when prices are high and more when prices are low, helping to balance out prices. This is why it’s often seen as a good approach when markets are volatile. Plus, it removes the worry of making a lump sum investment right before a market fall.
If you invest a lump sum just before a market downturn, you’ll be buying when prices are high, and you’ll miss out on the opportunity to buy more units at a cheaper price. This means that your returns are likely to be lower too.
Even experienced investors find it hard to time the market – selling investments just before prices go down and buying them just before they go up. This is particularly true during periods of market volatility when you could see big rises one day and equally big falls the next.
So, although with any investment approach the value of your investments can go down as well as up, and you could get back less than you paid in, regularly investing smaller amounts, rather than investing a large amount of money all at once, can feel less daunting.
How regular investing works: an example
Jane invests £1,000 a month over 12 months, while John invests a amount of money of £12,000 in January. Over the year, the market rises and falls, meaning investment prices also rise and fall.
| Month | Unit price | Jane | John |
| January | £2.00 | £1,000 | £12,000 |
| February | £1.91 | £1,000 | |
| March | £1.74 | £1,000 | |
| April | £1.70 | £1,000 | |
| May | £1.65 | £1,000 | |
| June | £1.57 | £1,000 | |
| July | £1.52 | £1,000 | |
| August | £1.57 | £1,000 | |
| September | £1.61 | £1,000 | |
| October | £1.65 | £1,000 | |
| November | £1.74 | £1,000 | |
| December | £1.83 | £1,000 |
| Jane | John | |
| Total units bought | 7,077 | 6,000 |
| Average price paid | £1.71 | £2.00 |
| Final value | £12,923 | £10,956 |
By December, Jane has bought over 1,000 more investment units and paid a lower average price than John. In addition, the value of her plan is almost £2,000 more.
When investing a large amount of money might work better
If markets are rising, investing a large amount of money from the start would mean you’d be buying investments at a lower price, which in turn could potentially mean higher long-term returns.
However, ups and downs are part of investing and no one can say with any certainty when markets will stop rising. So regular investing can be a useful approach to make sure you don’t buy at the wrong time and are able to take advantage of market ups and downs.
Making monthly contributions to a pension or ISA are easy ways to build a regular and disciplined approach to investing without even realising it. If you’re worried about market volatility, speak to a financial adviser to explore your options. If you don’t have one, we can help you find one. Advisers may charge for their services – though they should agree any fees with you upfront.
Remember, investment returns are never guaranteed. So, while investments can grow, their value can also go down. This means you could get back less than you paid in.
Past performance is not a guide to the future. Investment returns may fluctuate and are not guaranteed. This means you may not get back the full amount originally invested.