Drip Feeding Investment More Profitable than Market Timing

Even if you managed to time markets perfectly - investing on the lowest day of the year, it would not match returns gained through drip feeding markets Fidelity data reveals

Fidelity International 7 March, 2016 | 4:04PM
Facebook Twitter LinkedIn

Morningstar's "Perspectives" series features investment insights from third-party contributors. Here, as part of Morningstar's Guide to ISAs, Pensions and Tax-efficient investing Tom Stevenson, investment director for Personal Investing at Fidelity International explains the effectiveness of drip feeding your investments.

Drip feeding your investments into the markets could help you achieve significantly better returns than when trying to time the markets. Our analysis looks at three hypothetical investors – ‘Steady Eddie’, ‘Bad Timing Bob’ and ‘Good Timing Gary’. The analysis shows that Steady Eddie, who began investing regularly in the FTSE All Share in 1986, putting in £1,000 a year during that decade and bumping up his annual investments by £1000 each decade until January 2016, would have seen his original investment of £82,000 grow to £233,800.

On the other hand, Bad Timing Bob, who only invests in the FTSE All Share at the top of the market, is left with nearly half as much. Like Eddie, Bob saves £1,000 a year, upping his annual savings by £1000 each decade, but unlike Eddie, he invested the money he saved in the FTSE All Share just before market downturns. As a result, Bob’s original investment of £82,000 would be worth £120,970.94. While this is an increase of 148% it is nearly £113,000 less than Steady Eddie.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Fidelity International

Fidelity International  

is a global leader in asset management, providing investment products and services to individuals and institutions in the UK, continental Europe, the Middle East and Asia Pacific.