The idea of investing small amounts regularly could seem unappealing to many. However, you can cut out the extra hassle and time involved in making regular smaller investments simply by setting up a monthly Direct Debit mandate. But could this practice actually work in the long term?
What's the Psychology behind it and what are the benefits? Elson Associates - Investment Management Services UK
It's true that the way people are investing is changing over time. People are now experimenting with smaller, more regular investments to see if this maximises their chances of growing their return as well as their portfolio.
Markets have always been difficult to predict, even for those with many year of experience, and considering recent economic changes, this has become even more challenging. Investing on a monthly basis is one of the more simpler ways of avoiding volatility because the value of your investment will not change dramatically.
The benefit of investment on a monthly basis is recognised by the name of "pound cost averaging" which means that by investing the same amount each month and buying assets at different prices as the market moves, you can ride out the highs and lows more easily.
If you're new to investment, monthly investment can be a useful way of monitoring your investments and creating the discipline of putting money away on a regular basis.
What are the costs? Elson Associates - Investment Management Services UK
In the first few early months, only a small proportion of your money may benefit from any returns - but on the positive side, if the markets fall, only part of your investment is subject to losses, and the next time around, your regular investments buys you more, for less.
Investments will fall in value as well as rise but, with regular savings, falling markets allow you to buy more of the investment at lower prices.
Are there risks involved in this strategy?
Like all investments, there is always a risk of the markets rising or falling but strategies like the above mentioned may help you make the most of your portfolio.
To conclude, buying shares regularly in small amounts can be a prudent move. It can lead to less volatility and even improved returns in the long run.
Is it important remember that Elson Associates does not offer advice as to the suitability of investments. If you are unsure whether an investment is suitable for you, you should obtain expert advice. Past performance of an investment is not necessarily a guide to its performance in the future. The value of investments or income from them may go down as well as up. You may not necessarily get back the amount you invested.
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