Savers shouldn’t ‘sit around’ waiting to invest, The Share Centre argues

As we approach the end of the 2018/19 tax year, The Share Centre has highlighted that investors “scramble” to use their annual tax-free allowance before the midnight deadline on 5 April, losing out on valuable growth.

Data from The Share Centre revealed that, in 2018, 48 per cent of ISA contributions happened within the final ten days before the deadline. However, the firm has argued that investing at the start of the tax year rather than the end, means that investments have 12 months longer to grow in value, while also earning dividends, and can be worth more as a result.

However, The Share Centre highlighted that monthly contributions reduce an investor’s exposure to market volatility, by drip feeding money into the market, investors benefit from pound-cost averaging. Markets fluctuate regularly and investments can drop as well as grow. Although regular investing will allow savers to take advantage of this drop, due to the ability to purchase more units for the same investments.

Even in the volatile times since the financial crisis, the power of drip feeding and pound cost averaging prevails. Analysis of returns from the FTSE 100 over a 10-year period ending in the tax year 2018 further highlights the benefit of drip feeding. If investors had annually drip fed £10,000 over 10 years with an initial lump of £1,000, it would accrue over £1,300 more, which, according The Share Centre, “clearly proves” the benefits of regular saving.

Commenting, The Share Centre head of investments Andy Parsons said: “If you have money to save in your ISA allowance, there is no point in hanging around. Instead, take advantage of the new tax year’s allowance straight away and leave your investments to accumulate.

“Remember that time is money when it comes to investing; after all, as the saying goes ‘the early bird catches the worm’ and in this case, there is a whole year of potential returns to be had. Simply setting up a direct debit to invest regular amounts deposits the money for you and will allow you to sit back and let your investments do the hard work. However, don’t make any hasty decisions – remember to take your time and identify your investment goals and time horizons.”

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