Finding the right mix of savings and investments is important for your long term financial plans. So while there’s no disputing the merits of investing as part of your strategy, you may be wondering how exactly you should be investing. There are certain products that will dictate your decision for you: high street banks limit the number of months you can invest and most ISA allowances need to be topped up monthly. So which is right for you? Investing on a regular basis or as a lump sum?
This does not constitute advice and advice should be sought in all instances before acting on it.
Balancing your investments with your financial circumstances
First and foremost, many individuals simply don’t have the luxury of having a lump sum to invest, so monthly contributions is the only way they can successfully add funds to their savings and investment accounts.
If you don’t normally have the money throughout the year, a great time to invest a lump sum is at the end of the tax year with any money you have left over after paying your tax bill.
However, investing regularly is also a great way to reduce the amount of tax you pay. Consistently contributing to an ISA or a pension account, for instance, will save you from paying tax on the interest or growth the account provides.
A benefit of going this route is that you can utilise a technique called “pound cost averaging” to effectively reduce the overall cost of the units you purchase and decrease risk by buying more when the prices are low and less when the cost is high, averaging out the price over time. In an unpredictable market, this is a great option for those who are risk averse.
Choose the right mix for you
In the end, investing regularly or all at once depends on your individual situation – your income, how much you’re willing to invest, how aggressive you need your return to be, and your age are only a few factors that play into your decision making process.
You may be thinking about investing a lump sum or contributing regular instalments, or perhaps you need your current portfolio reviewed by an expert. Some products you are interested in may even make your choice for you by the way they are set up.
The best decision you can make before deciding whether or not these are right for you is to consult a professional adviser.
The advisers at Dental and Medical Financial Services will work with you to provide guidance and advice for your financial future.
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