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Three reasons why you should think about investing monthly into an ISA

We take a look at the key benefits of drip-feeding money into investments each month.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Whether you’re starting out, or a seasoned investor, there are some great benefits to investing monthly into a Stocks and Shares ISA.

In fact, we think it could be one of the best and most overlooked ways to try and grow your money over the long term. And the recent market volatility could make monthly investing even more appealing.

Here are three reasons why.

This article isn’t personal advice. If you’re unsure of the suitability of an investment for your circumstances, seek advice. Past performance isn’t a guide to future returns, investments will rise and fall in value so you could get back less than you invest.

Taking emotion out of investing

When investing a lump sum, you’re committing all your money to the stock market in one go. You’ll get the full benefit if your investment rises in value. But, if it falls, you'll feel the full negative effects.

Falling values are an understandable concern for investors, especially following recent market falls. It could even put people off doing anything.

Knowing the perfect time to invest is very difficult. Often people follow the crowd – they buy when the market rises and sell when it falls. This is a part of human nature, but could lead to worse returns over the long term.

These quotes from two of the best investors in history summarise this perfectly.

Peter Lynch: ‘Trying to predict the direction of the market over one year, or even two years is impossible.’

Warren Buffett: "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."

Investing smaller amounts every month can help solve this. It takes emotion out of investing. Drip feeding in to a volatile market could mean the average price you pay for your investments ends up being lower than a single lump sum investment.

You can focus on the future, rather than worrying if today, tomorrow or next week's a better time to invest.

Find out more about investing monthly

It's affordable and you won’t forget

With most of the UK in lockdown and millions of people furloughed, you might be in a position where you can’t or don’t want to put a lump sum into your ISA in one go.

Instead you can set up a Direct Debit and invest monthly with as little as £25 a month. And you can focus on the more important things you have to worry about.

Once you've set up your Direct Debit and decided where you want it invested, the money comes out of your bank account each month. It's then invested for you. You'll get used to the money leaving your bank account each month and it'll soon become part of your monthly spending.

Over time, you could build a significant pot.

The chart below shows £10,000 invested in the UK stock market since the start of the millennium. One shows an initial lump sum investment of £10,000, the other shows the same amount split into monthly investments of £100 from the start of the millennium until April 2008. Both are then left to grow until the present. Please note, this calculation doesn’t include charges and inflation.

Whichever option you took, you’d have made a good return on your investment, with both returning over 95% growth. But, during this time, you would have been £1,680 better off by investing monthly. There are no guarantees this will happen in the future and investments can fall as well as rise in value, so with either method you could get back less than you put in.

£10,000 invested in the UK stock market

Past performance isn’t a guide to future returns. Source: Thompson Reuters Eikon to 31/03/20.

Flexibility

Your circumstances can change from month to month. This can impact what you can afford to invest. You could have an unexpected bill to pay, a loss of income or you might have a little more money to invest. Having the option to change your monthly investments is important.

With HL, you have the flexibility to increase or decrease your monthly investments to suit your current situation. You can even stop or pause payments whenever you want – as long as we receive the instruction 10 working days before the collection date.

It's also easy to change where you invest. You can choose from funds, FTSE 350 shares or selected investment trusts and ETFs. Charges will differ depending on what investments you choose.

Stocks and Shares ISA charges

Find out more about investing monthly

How to invest monthly in an HL Stocks and Shares ISA

The fastest way to set up your Direct Debit is online. You’ll need your bank details to hand.

  1. Log in to your online account
  2. Choose the account in which you'd like to set up a Direct Debit
  3. Click the 'Monthly Savings' tab and follow the instructions

If you don’t already have an account with us, you can find out more and compare the different accounts we offer.

Compare accounts

How to change your monthly Direct Debit

Online

For Stocks and Shares ISAs, Lifetime ISAs, SIPPs and Fund and Share Accounts with HL:

  1. Log in and choose the account you’d like to make the change in (e.g. HL Stocks and Shares ISA)
  2. Click on the ‘Monthly savings’ tab and follow the instructions

Using the mobile app

  1. Download the free HL mobile app and log in
  2. Tap the account you’d like to make the change in (e.g. HL Stocks and Shares ISA)
  3. Tap the symbol with three lines in the top right hand corner
  4. Tap Regular Investing and follow the instructions

Find out more about investing monthly

You can change your Direct Debit and investments at any time. But any changes made to the amount fewer than 10 working days before the Direct Debit is taken will apply from the following month.

The investment choice can usually be changed up to the day before, depending on how the instruction is given.


Let us know what you think of this article


Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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