Could investing regular amounts work for you?

 

Some people are put off investing because they think they need a big pot of money to get started. But that’s simply not true.

While you might have a big pot ready to put in – from a cash ISA you’ve already built up but want to make more from, or an inheritance for example - you can also get the ball rolling by putting in regular amounts, adding to your investment over time.

All investments come with some degree of risk, that’s just a fact. But adding to an investment in stages can help you manage some of that risk. And what’s more, you may find there are some longer-term advantages to investing on a regular basis. Let’s look at why.

Why consider regular investing?

The one definite thing about investment markets is that they will go up and they will go down. When, and to what extent, is much harder to predict. But each time the markets move it will have some impact on your investment.

When you invest you’ll usually buy a number of units or shares in what you choose. We’ll assume it’s an investment fund you’re interested in. How many you get depends on how much money you have and the price of each unit or share at the time. If the markets go up, your units or shares could get the benefit of that growth and their value may go up. But if the markets go down, the value of your units or shares may fall.

When you invest by putting in regular amounts of money over time, the number of units or shares your money buys will vary depending on their price at the time.

If the markets are up and the units or shares are more expensive, you’ll get fewer.

But if the markets are down, they’ll be cheaper and you’ll get more. This is one of the times when you can actually benefit from markets being lower. And the more units or shares you have the more benefit you’ll potentially get when prices go up again.

Of course that’s not guaranteed though – nothing is with investment markets.

It can help to manage your risks

It might sound like all you have to do is wait until the markets are at a low point, buy the highest number of units or shares you possibly can, and then sit back and enjoy the growth.

But it’s not that simple in practice.

Trying to predict when investment markets will rise or fall is notoriously difficult. You have to be a real expert to get it right – and even then, it’s still a risky approach.

So by adding to your investment over time instead of buying it all in at once, you’re not exposing all your money at once to the risk of getting your timing wrong.

By this we mean buying all of your units or shares when the prices are perhaps at a temporary high and so ending up with fewer than might otherwise have been the case.

It can help build your confidence

Adding to your investment over time can also be a good way to build up experience and confidence.

And if you later decide investing’s no longer for you, or things get tight for a while, you can stop paying in at any time or (if you have to) even sell some of your units or shares and you’ll usually get the proceeds within five days.

That’s why investing in regular amounts works for a lot of people. Perhaps it could for you too.

Please remember though, the value of investments goes up and down and you can get back less than you put in. If you can’t commit to investing for at least five years and don’t want to or can’t take the risk of losing any money, investing may not be the right way to meet your goal.