Pound cost averaging | MoneyTalk

MoneyTalk tells you what you need to know to manage your investments better.

In this clip Emma-Lou Montgomery explains the benefits of pound cost averaging.

Transcript - Benefits of pound cost averaging

Investing the full pension or ISA allowance can seem daunting. Especially if you haven’t got the cash to spare. But it doesn’t have to be rocket science.

The numbers show that investors who actually drip feed their money into their ISA or pension tend to do better than those who invest a lump sum in one go.

There’s a simple formula.

By regularly investing a small sum you benefit from pound cost averaging.

Here’s how it works. Invest the same amount regularly and when prices are low your money will buy more than when prices are high. You even out the ups and downs. And that way you don’t need to worry if, by some stroke of bad luck, you invest the day before the market falls.

Markets do that and that’s OK, because they go back up as well.

You’ve just got to remember - drip feed money into the market, stay invested - and hold your nerve.

Important information:

The value of investments and the income from them can go down as well as up, so you may not get back what you invest. If you invest in an ISA or pension there is no capital gains tax on growth and no income tax on interest. The value of tax savings and eligibility to invest in an ISA or self-invested personal pension (SIPP) depend on personal circumstances. All tax rules may change in future. With pension products you will not be able to withdraw your money until you reach age 55. If you redeem ISA holdings, you cannot reuse that ISA allowance.  This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.