Rising markets have made the question of regular vs lump sum investments a vexed one.
The dilemma among investors as to whether or not to drip-feed money into markets - or instead invest lump sums - has been explored in a major new report.
According to the Association of Investment Companies (AIC), lump-sum investors have achieved higher returns from their portfolios over the long-term - but investors who drip-feed small amounts of money at regular intervals have had comparatively better results in the recent financial crisis. This is because the credit crunch has caused massive turbulence on the global stock markets, pushing the FTSE 100 down by as much as 50 percent.
Overall, the AIC study showed that someone who puts £50 into the markets each month through a typical investment company is down seven percent on the year. However, someone who invested the same amount - £600 - 12 months ago and therefore maximised their exposure all at once will have lost 30 per cent.
Over ten years - a period including the market boom which preceded the credit crunch-induced downturn - a £6,000 lump sum investment will have returned 44 percent, while £50 a month over the period would return 15 percent.
Annabel Brodie-Smith, communications director at the AIC, said: "Our research illustrates that over the longer term lump sum investments have outperformed regular investments as markets have generally risen over a long time-frame."
The report comes at a time when markets are rallying, with the FTSE 100 off its 2009 low of 3,512 to reach almost 4,500. This means that investors keen to return to buying shares are weighing up what strategy to take in order to maximise returns.
"Investors looking to re-enter the stock market may be prepared to give up some of the potential long-term outperformance of lump sum investing and gain a lower risk profile by drip feeding their investment," Ms Brodie-Smith added. "Regular saving can help smooth out some of those stomach churning highs and lows in the price of shares."
