It’s been an exciting couple of months in global stock markets – if cliff jumping or taking on the world’s largest water slides are your entertainment of choice.
If you’re not so keen on feeling like your stomach is in your mouth, then you would be forgiven for replacing the word ‘exciting’ with ‘worrying’: it’s never nice to see your investments fall in value.
At the time of writing, the UK stock market, has experienced its worst fall since 1987 and is currently down almost 29%* year to date.
No one knows if this is the ‘bottom’ or if markets will fall further, and this makes it very difficult for investors.
But rather than umming and ahhing and trying to second guess the direction of stock markets, taking a 'little but often' approach could be a less stressful solution: instead of investing a lump sum, you could invest smaller amounts each month.
What’s more, it’s easy to set up or amend monthly savings. You can start them online or over the phone with our client service team (020 7384 7300).
Already in 2020 – just three months in – regular investments have been the most successful strategy.
£4,000 invested in the average UK fund on 1st January 2020 would be worth £2,764.19 today. Had that investment been spread out, with £1,000 invested on the first of each month, an investor would be more than £235 better off, with a pot of money worth £2,999.53.
The same amount invested in LF Lindsell Train UK Equity, the best performing UK All Companies Chelsea Core Selection fund so far this year, would be worth £3,188.14. A monthly investment in the same fund would be worth £3,457.69 – some £269.55 more.
|Chelsea Core Selection fund name||£4,000 lump sum today||£1,000 per month today||Difference|
|LF Lindsell Train UK Equity||£3,188.14||£3,457.69||+£269.55|
|Liontrust Special Situations||£3,091.74||£3,248.96||+£177.66|
|Marlborough Multi Cap Growth||£2,949.72||£3,193.85||+£244.13|
|JOHCM UK Dynamic||£2,469.21||£2,760.71||+£291.50|
While monthly savings won’t bounce as much in a speedy recovery, as the data above shows, there are a number of potential benefits they do offer:
*Source: FE Analytics, total returns in sterling for the FTSE All Share, and funds in the IA UK All Companies sector,1 January 2020 to 6 April 2020
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius’s views are his own and do not constitute financial advice.