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Get into the investment habit

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Summary

Making regular payments into your investment account, when it suits you, is a great way to help build your wealth

2 min read

Regularly topping up your investments can help you reach your savings goal sooner. And if you don’t have an investment account, setting up regular payments is a great way to get started. 

With inflation currently at 3% and few savings accounts paying more than 2%, leaving your money in the bank can erode its worth. Our research also shows that the inflation of luxury products and services, such as high-end smart phones, can be much higher than the standard rate. Investing gives you a better chance of matching – or beating – inflation and reaching your financial goals faster.

Investing isn’t only for people with a large lump sum. Investing regular amounts can help you build up your wealth while getting exposure to investment returns. Remember, though, that the value of investments can go down as well as up, and you may not get back as much as you invested. Before investing you should always be sure that you understand and are comfortable with the risks involved.


Lump sum versus regular investing?

If you have a lump sum, our research shows that you are generally better off investing it all at once – and as soon as you can – rather than drip feeding it into the market or waiting for ‘the right time’.

Larger sums tend to generate a better return over the long term than investing regular smaller amounts because your money has more time to work. In the meantime, waiting for the right moment to invest can mean you miss out on growth – timing the market is very hard to do, however much investment knowledge you have.

But if you need to find a home for spare cash on a frequent basis, regular investing definitely has its place. It’s also a good way to start building up capital for children or grandchildren. Working on the same principle as for a lump sum, that it’s good to get your money working as soon as possible, putting aside a little every month means you are getting exposure to market growth at the earliest stage.

“If you need to find a home for spare cash on a frequent basis, regular investing definitely has its place.”

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Set up a regular investment to make the most of your ISA

You can also use regular investments to help make sure you take full advantage of your Individual Savings Account (ISA) entitlements. The ISA allowance for the 2018/19 tax year is £20,000 and if you get into the habit of using it every year it can soon accumulate to a meaningful amount.

Setting up a regular payment into a stocks and shares ISA means you are less likely to forget to use your allowance. Simply making a regular monthly investment of around £1,600 through an online service such as Coutts Invest at the start of the tax year will ensure you use most of your allowance. After five years, you would have invested nearly £100,000 on which you will pay no tax on your returns, depending on your circumstances and assuming allowances and the rules around using them don’t change.

According to statistics released by HM Revenue & Customs in August 2017, over 2.5 million people opened adult stocks and shares ISA accounts in the last tax year with an overall value of £315bn and the trend is rising.

Whether you decide to use your ISA allowance or not, there’s a lot to be said for getting into the habit of regular investing. You can get started with as little as £500 initial investment with Coutts Invest if you are over 18, UK resident or domiciled and using Coutts Online, giving you access to Coutts investment expertise.

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KEY TAKEAWAYS

Synchronised global growth created a supportive economic environment which benefited equities around the world in the fourth quarter of 2017. At Coutts, our positions in Japanese and emerging market equities were particularly strong contributors to performance, with our tactical positions in Europe and global technology also doing well.

About Coutts investments

With unstinting focus on client objectives and capital preservation, Coutts Investments provide high-touch investment expertise that centres on diversified solutions and a service-led approach to portfolio management. Our investment process is as disciplined as it is creative – ensuring tailored solutions with robust results.

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