Regular Investing

Regular investing can give you a way to get started as an investor and act as a tactic to cope with your emotions during the current challenging market conditions.

You will no doubt have read plenty of information from ourselves and others urging you to make use of your ISA allowance each tax year. But you could argue the current ISA limit of £15,240, which will rise to £20,000 in 2017, is a substantial amount of money. To put it into context we have broken it down into two earnings examples:

Here's the rub...

  • A higher rate tax payer earning £150,000 a year would require £23,813 of gross income in order to use this year’s full ISA allowance.
  • For someone earning £40,000 a year that figure is £17,929.

Making a one off investment such as those above may feel like a major financial commitment, especially given the way the markets are right now. Using regular investing could help to give you a way of making full use of the allowance, or allow you to use as much of your allowance as you can reasonably afford, as early as possible so you can benefit from compounding.

Equally regular investing can be used for your pension. It is important to remember that medium-term investment goals should be managed alongside your pension pot. Every contribution made by an individual into a workplace pension scheme is matched by their employer and topped up with tax relief by HMRC. Even if you are not currently in employment you can still pay in a pension contribution of up to £2,880 a year and receive a 20% top up from the government, giving you an annual maximum of £3,600.

A worrying statistic

Figures from the Investment Association show investors withdrew a net £230 million from stocks and shares ISAs in February, at the bottom of the market and at precisely the time when they should be thinking about making tax efficient investments.

TD Direct Investing does not provide tax advice. Please note tax treatment depends on your individual circumstances and may be subject to change in the future.

Use regular investing to drip feed savings

An option for all investors, irrespective of whether you’re a higher rate tax payer, is to use regular investing as a way of drip feeding money into your ISA or SIPP over time. Instead of a one off investment prior to the new tax year, a regular monthly contribution is an excellent way of both managing your savings and benefiting from being invested in markets as early as possible.

How regular investing can help your money perform

The chart below shows how an investor would have grown their assets over time if they’d invested the full PEP allowance from 1987 to 1999 and the full ISA allowance from 1999 onwards. The green line shows returns assuming that we invested the maximum ISA allowance in the FTSE All Share index on the first trading day of each financial year since 1987. The blue line shows the cumulative amount of money used for investment.

A total PEP and ISA contribution of £242,520 reinvested on 6 April each year into the FTSE All Share index would have delivered a return of £491,068 as at 5 April 2016.

Short-term volatility versus long-term gains

Regular investing can also address the issue of market timing, particularly in volatile market conditions. Timing markets is notoriously difficult – even fund managers struggle to get it right. The best thing you can do is invest regularly as early as possible and stay invested.

Time in the market, rather than timing the market, is key.

Gary Potter, co-fund manager of F&C MM Navigator Moderate, which forms the active part of our "Steady performance is key with some risks" Quick Start Funds offering, points out markets have down days, and he see these as opportunities. "The investing public at large tend generally to buy high and sell at the low point. You should do the opposite. Go against the crowd." Regular investing enables you to invest into funds which can do just that and gain from the fund manager using the tried and tested formula of buying on market dips.

Simon Evan-Cook, fund manager of Premier Multi-Asset Growth & Income, the active fund in our "Looking for higher returns but accept greater risks" Quick Start Funds offering, says he spreads investments far and wide with a view that he doesn’t know what's coming. “We cannot predict the future. The best way to deal with an uncertain future is to get yourself set today.” Again a great way to do this is via regular investing.

Source: ISACO, Morningstar Direct and TD Direct Investing. Past performance is not a reliable indicator of future results. Maximum allowance for each year invested in the FTSE All Share on 6 April that year. PEPs were launched in 1987 and superseded by ISAs in 1999.

How are you feeling?


If you are feeling nervous about where markets are heading at the moment you could consider including absolute return funds in your TD ISA.

Some of these absolute return funds can be found in our TD Recommended Funds list which you can access here

Funds such as Henderson UK Absolute Return and Newton Real Return aim to preserve capital and deliver a positive return whatever the market conditions. There are also others which fit the bill.

Please note Absolute Returns funds use complicated financial techniques and may only be appropriate for sophisticated investors. Before investing you should ensure you fully understand the associated risks.


Funds like BlackRock UK, FP WHEB Sustainability and Baillie Gifford International could help you achieve capital growth over the long term.

The BlackRock fund seeks out UK growth opportunities which generally fall into the categories of structural change and disruption, or companies with competitive advantage in an industry sector.

WHEB Sustainability searches the globe for growing, profitable companies which are providing solutions to sustainability challenges and making the world a better place.

Baille Gifford International offers exposure to an international portfolio of stocks with a focus on disruptive growth, which is an exciting theme we are following.

Get started - How does regular investing work?

You can invest regularly from £25 per month into your TD ISA or SIPP, investing in funds, equities and exchange traded funds (ETFs). This costs as little as £1.50 commission for FTSE 350 stocks or UK listed ETFs, and £0 commission for funds (please be aware our Platform Fee and Ongoing Fund Manager charges will apply).

You may then choose up to 10 funds, stocks and/or ETFs to invest in each month.