2 surprising benefits of choosing to drip-feed your investments

If you want to start investing or would like to boost an existing portfolio, your mind might turn to using a lump sum. However, there could be benefits to drip-feeding your investments instead.

Drip-feeding means you slowly add money to your investment portfolio. So, rather than investing £10,000 straightaway, you might increase your investment portfolio through £500 boosts each month.

One of the key benefits of drip-feeding investments is that you don’t need a lump sum available now. As a result, it could be a useful option if you’re investing for the first time.

While investing a lump sum might seem more straightforward, drip-feeding your investments could be beneficial in helping you manage your portfolio and even has the potential to improve returns.

1. Investing in smaller amounts could ease investment worry

Research from Lloyds Bank found that half of Brits are intimidated by investing. You might worry about investing at the “wrong” time or how to select investments that are right for you.

Drip-feeding can alleviate some of the fear you might have about investing. As you’d be investing smaller sums each time, it could help make it seem less daunting and ease your concerns about losses.

That’s not to say it isn’t important to still weigh up investment risk. You should assess which investments are right for you and whether they suit your risk profile. Reviewing which investments suit your goals and circumstances is something we can help you with.

What’s more, drip-feeding can help make investing part of your regular outgoings – you might decide you want to invest a proportion of your income each month. This approach may mean you feel more confident managing your investments over time.

Regular deposits could also create positive money habits. Over the long term, you might end up investing more than you would if you invested a lump sum if it becomes part of your monthly budget.

2. It could help smooth out market fluctuations

The ups and downs of the market are one of the reasons investing can seem intimidating.

Market movements are often unpredictable and the value of your investments will rise and fall over the short term. For some, this could present a good reason to drip-feed investments.

If you invest a lump sum just before the market experiences a downturn, the value of your investment could fall immediately. In contrast, when you spread out depositing money into your investment portfolio, you’ll buy assets at different points in the market cycle. This may help smooth out the peaks and troughs so you experience less volatility. It’s an approach that is known as “pound cost averaging”.

As you’ll be investing regularly, drip-feeding can also remove the temptation to try and time the market.

Every investor would love to buy when shares are at a low and sell at a high. Trying to time the market to achieve this might seem like an attractive option, but unpredictability means it’s impossible to consistently time the market. Even investment managers, who have staff and resources at their disposal, can get it wrong.

There’s a chance you could sell and end up missing out on gains. Missing just a few of the “best days” each year could significantly affect investment returns.

Keep in mind that volatility is part of investing. The value of your portfolio may be affected by short-term fluctuations, but, while investment returns cannot be guaranteed, historically, markets have delivered returns over a long-term time frame.

Frequent deposits into your portfolio could help you focus on the bigger picture and your long-term goals.

Contact us to talk about your investment strategy

We can work with you to create an investment strategy that’s aligned with your goals and circumstances. Whether you want to drip-feed investments or you have a lump sum that’s ready to be invested now, we’ll work with you to create a tailored plan.

Please contact us to arrange a meeting and learn more about how we could support your investments and wider financial plan.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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.

Speak with our Financial Planners today

Related blog posts

Economic Review – August 2022

The latest gross domestic product (GDP) statistics show the UK economy grew unexpectedly in May although forward-looking indicators still point to a deteriorating outlook. In…

Read More

Economic Review – July 2022

The latest gross domestic product (GDP) statistics show the UK economy unexpectedly shrank in April, increasing concerns about future growth prospects. In our economic update…

Read More

Guide: Everything you need to know about annuities when creating a retirement income

When you retire, you will often have a range of choices available to you about how you access your pension. One such method is an…

Read More

Wealth Management for Entrepreneurs and Executives

  The wealth management market is very much segmented and filtering through this to assess the best service, relationship, cost, security, and breath of offering…

Read More

Why use a Financial Adviser?

  In our case study below, we run through the scenario of some new clients who thought they could manage their portfolio themselves. However eventually…

Read More

How do you find a lost pension?

  Research by the Association of British Insurers (ABI) conducted in 2018 found there were approximately 800,000 lost pensions in the UK which amounted to…

Read More
Coming to a crossroads in life

Financial Planning as a result of selling a limited company

Selling shares in a construction company John had a business in construction that he owned with two co-directors. They decided to sell the business as…

Read More

Planning for Retirement

Self-employed, with a number of pensions Spencer is 65 and lives in Worthing with his wife.  He is a self-employed carpenter. Spencer came in to…

Read More

Michael and Mandy

Michael and Mandy are 46 and 43 respectively, and own a business in Worthing. They were in the process of buying the business from the…

Read More