ISAs can benefit from small monthly payments Go compare with our comparison table

ISAs can benefit from small monthly payments

14 April 2010 / by Lois Avery

Saving smaller monthly amounts into your ISA can be more effective in the long run than parting with lump sums, says Fidelity International.

The investment specialists have carried out research to show how saving little and often in your ISA can be just as cost effective over a prolonged period of time as making the most of your ISA allowance in one hit.

And it will also benefit those savers who want to make the most of their money but can’t afford to invest large sums in one go.

Rob Fisher, head of UK Personal Investments at Fidelity International said: "A monthly investment plan can be a good way to maintain a long-term investment strategy and is a useful way of being disciplined about saving for the future.

 "And you may be surprised at how much even small amounts can grow over a number of years."

The figures show that an investor who decided to drip-feed their ISA via a regular monthly savings plan since ISA's began in 1999 would now have invested a total of £76,800 and would have a pot of money worth nearly £100,000 (£99,359) today.

This was compared with a lump sum investor, who would have invested a total of £77,400 and have a pot of £99,174, so a monthly savings plan would have worked out slightly better over the course of 10 years.

The results also showed how this method of saving would benefit an ISA account being paid into monthly over a 20 and 30 year time frame.

Regular monthly savings can also benefit from "pound cost averaging" - where the effect of market changes on savings is effectively smoothed out over a longer period of time.

Rob Fisher  added: "It is understandable that not all investors will be able to part with the maximum ISA allowance in one go, however, this does not mean that you can't take advantage of the full allowance on a monthly basis.

“The analysis shows that drip-feeding your investments over the course of the year can, in fact, be more beneficial since it is less affected by market volatility."

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© Fair Investment Company Ltd

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