5 reasons regular investing can be a great investment strategy

Regular investing allows you to invest a set amount into the markets each month. Saving little and often in this way can be a great habit that could make a big difference to your overall levels of wealth over the longer term.

Topping up your investment portfolio on a regular basis with smaller amounts of money can also prove less risky and more profitable.

Drip-feeding your money into the stock market will mean you end up buying shares at different prices. So, when prices rise, your money will buy fewer shares. But, when prices drop, your money will go further and buy you more.

This way of purchasing shares on a regular basis, instead of bulk-buying with a hefty sum, is also called “pound-cost averaging”.

If the market goes through a rough patch, as we have seen during the first half of 2022, regular investing helps cushion the impact.

While there's no guarantee of achieving better returns than investing a lump sum over a fixed, long-term period, you will end up paying the average price of the share. It is this that reduces your risk and provides you with potentially smoother returns.

Regular investing can be an ideal way to save money for children

By investing regularly while children are growing up, it’s possible to accrue a healthy lump sum. This can then be used to cover university fees, a deposit for their first property or an adventure, such as world travel or starting their own business.

Here are five more reasons regular investing can be a sensible option if you want to grow your wealth.

1. Build discipline

Investing regularly helps you form good habits and keeps you committed to a long-term investment strategy.

Typically, the longer you leave your money invested, the greater the potential rewards. Over time, your regular investment should build up, no matter how little you might save each month.

For newcomers to regular investing, a good approach is to invest a fixed portion of income each month. Then, as your income fluctuates over your working life, you can adjust the amount you’re saving in line with the amount of money you are making to build up a future nest egg.

Commit to regular saving, and it won’t be long before you start to accrue a sizeable pot, which can help keep you motivated to keep drip-feeding your investments.

2. Profit from compound growth

Compound growth is the most powerful and underrated benefit of long-term investment, and has its largest impact during the latter stages of your investment journey.

For example, 10% growth on £1,000 is only £100, but 10%growth on £1 million is £100,000.

So, starting early and establishing a strong saving habit is vitally important if you want to reap the full rewards of compound growth.

Even if the amount of money you’re investing each month may seem small, these small sums add up and will ultimately make a big difference later down the line.

As an illustration of the power of compounding, if you invested £500 a month for just five years – from your 16th to your 21st birthday – in a fund that delivered 5% a year, and made no other contributions for the rest of your life, by your 60thbirthday you’d have accrued almost £300,000 (The Calculator Site).

3. Bounce back sooner following market dips

If markets fall, investing at regular intervals means your money will buy more stocks or shares while their prices are low.

Likewise, if you invest when markets are high, your money will buy fewer stocks or shares.

This means that the percentage decline in the value of your investment is also lower when markets fall. As mentioned above, this pound cost averaging can help to eliminate the impact of volatile markets because, over time, you end up buying the average market price.

4. Enjoy potential bargains

When stock market prices start to fall, some investors begin to panic and tend to avoid investing more money into the stock markets.

Investors who get spooked by market changes may pull their money out of the market or refuse to enter the market until things settle down.

And yet, because investors’ fear drives prices artificially low, this is often the best time to buy into the market. At times like these, adding to your investment means that you may enjoy larger returns when the markets rally.

Many people find it difficult to remove emotion from investing and so struggle to benefit from market downturns. Helpfully, regular saving reduces this emotional element of investing.

The table below shows how a regular £1,000 investment every month during 2018 compared with a £12,000 lump sum invested at the beginning of the year. In both cases, dividends are reinvested and don’t take fees into account.

Source: Bloomberg

5. Avoid temptation to “time” the market

Some people will agonise over when they should invest their money in the stock market, hoping to find the absolutely ideal time to buy. Unfortunately, as we all know, there’s rarely such a thing as “perfect”.

Even professional investors and money managers with substantial sums to invest will drip-feed their funds into the market over time(usually over the course of a few months, depending on the circumstances).

As the strategy of seasoned professionals, it’s a great approach for novice investors.

Get in touch

Regular investing is a powerful discipline that you can use to build your wealth. The sooner you start, the better.

We offer free investment consultations for expats both in the UK and abroad. Regardless of your level of investment, we will assess all your needs including areas such as:

· Regular investing

· Lump sum investing

· Investing for income

· Education fee planning

· Investing for the future generation.

To find out more about how we can help you invest your money wisely and help you profit from long-term growth, email enquiries@alexanderpeter.com or call us on +44 1689 493455.

Please note: The content of this newsletter is offered only for general informational and educational purposes. It is not offered as and does not constitute financial advice.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.