How often should I invest?

How often you invest, like your other investing decisions, ultimately comes down to personal preference and what you can comfortably afford to put aside for the long term (usually a minimum of five years). But we want to introduce you to a way of investing many choose to go for: regularly, each and every month.

Here we’ll chat through the ins and outs of regular investing: reasons to do it, considerations before you get started and, as always with this series, how you can actually go about it.

Reasons to invest regularly

Little and often (and less scary!)

Many people believe the myth that you need a huge stash of cash to start investing – and that’s definitely what I thought before getting started. The truth is you can invest with as little as £25 a month and build up your investments over many years.

Besides the obvious financial barrier to investing a big lump sum in one go, when starting out investing, doing it all at once can feel quite scary. So, taking it a month at a time, and smaller amounts at a time, can be a great way to ease yourself in. It may also mean you can get started investing sooner than you think.

Make mine automatic

Regularly investing isn’t something you need to add to the diary or set a reminder for. Most providers now offer this way to invest as standard, so you can set it up and pretty much forget about it. ‘Pretty much forget’ because it’s important to keep an eye on your investment portfolio, just in case your financial goals change or you need to diversify to reduce your risk.

Setting up your regular investments involves choosing the amount you’ll invest each month and telling your provider the investments you want that amount to buy. Orders in, your money is put to work for you, automatically each and every month, without you lifting a finger. You can sit back, relax and bask in your organisational glory!

Take the stress out of when to invest

‘When is the best time to invest?’ is a question everyone wants to know the answer to. But choosing the right time to invest is famously hard, and honestly even the professionals don’t always get it right.

With regular investing you’ll have a structure you can stick to, which could prove especially helpful when keeping impulses in check around dips and peaks in the market. And remember the key thing is getting your money into the stock market and keeping it there for the long term – remember the trusty adage: “Time in the market beats timing the market”.

A little something called ‘pound-cost averaging’

There’s a lot to be said for regular investing from a behavioural perspective – it can be a great financial habit to get into. But it’s also worth mentioning the smoother returns it could bring you, thanks to something known as ‘pound-cost averaging’. This sounds like a confusing bit of jargon, so let’s explain.

When you put aside the same amount to invest each month, as you’d do with regular investing, you’ll be buying more units or shares of an investment when its price is low, and less when the price is high. That means you’re averaging out the price you’re buying at, reducing the risk of putting all your money in at the market peak. Here’s a little example to help make sense of it.

Let’s say I put aside £25 each month to invest in The Best Company in the World. When the market is down and its share price is low at £5 per share, I’ll be buying five shares with my £25. But when the market is up and The Best Company in the World is thriving at a sky-high £10 per share, my £25 can only get me 2.5 shares. So, I’m taking advantage of the market (and price) dip by buying more at that time, while protecting myself from buying all my shares when the price is at a high.

Things to consider before investing regularly

Investing smaller amounts regularly can suit many first-time investors for the reasons already mentioned, but it may not suit all, and there are some things to consider before getting started.

Being able to invest £1,000s all at once isn’t an option for most but if you do find yourself in this position (perhaps a generous bonus, inheritance etc..), there is an argument to getting that cash into the market as soon as possible.

As of March, inflation was still into double figures and uninvested cash was effectively losing value. Because investing your cash can protect it from inflation over the long term – and potentially grow its real value – the sooner you invest could be the better.

Another consideration before choosing how regularly you invest is, of course, cost. Investing little and often just doesn’t make sense if you’re paying £10 each time, per investment, to do it. Fortunately many providers now offer a discounted rate to regularly invest – and even some, like Dodl by AJ Bell, offer it for free!

Just remember to do your charges homework on this one, to make sure it makes sense for the amount you’re investing.

How to go about investing regularly

Thankfully, because of its broad appeal, plenty of investment apps and platforms now offer regular investing. You can usually put aside as much or as little as you want, and it can all be automated so you can ‘set and forget’ about your regular investments.

As always though, check the risks and compare providers’ charges, to make sure you’re getting the best deal for you.

With Dodl and AJ Bell, you can invest regularly from as little as £25. You’d simply drip your chosen amount into your account via direct debit at the start of the month and use that cash to buy more of your chosen investment(s) a few days later. Then the cycle repeats!

Investing regularly means you’ll gradually build up your investments steadily with affordable amounts over time, and it can be a great way to build your investing confidence too. Plus, if you want to, you could always add to it with a lump sum deposit, if you find yourself with more money to spare.

If you want to go one-step further you can then set up regular investments in your account so that money is automatically invested for you. Just pick which funds or shares you want to add to each month and set it up – and as an added bonus you could save on fees.