Invest regularly

The theory

To improve your chances of investing successfully, you'll probably need to keep investing - and stay invested - when the going gets tough.

When our investments lose value, this can be hard, as it's natural to want to sell or not to invest more. And yet a market dip can often be a good time to invest in the long run.

In reality, even the experts find it hard to time the market. Staying invested can help you avoid costly mistakes.

How it works in practice

Let's look at two investors.

Harry gets lucky and times the market well, missing the 10 biggest one-day falls.

Odine tries to do the same but misses the 10 best one-day gains.

By avoiding losses, Harry's investments do better. By missing gains, Odine's do worse.

If they'd both stayed invested instead, they wouldn't need to worry about making the 'right' decision at the 'right' time - and their investments would have performed more consistently.

This example is for illustrative purposes only. The value of investments can fall as well as rise, so you may get back less than you invest. Past performance is not a reliable indicator of future returns. The return shown here does not take account of charges which would reduce these amounts.

The theory

One of the benefits of investing regularly is that it takes the emotion out of investing and puts your money to work - no matter what the market is doing. It removes the temptation of trying to time the market. There are pros and cons to this.

If the market falls, investments don't cost as much and you'll get more for your money. When the market rises, the price of investments go up and you get less for your money. Over time the price you pay for your investments will average out. This is also known as pound cost averaging.

How it works in practice

Eliza and Andrew have £12,000 to invest over the year. The difference is that Eliza regularly invests £1,000 each month, while Andrew invests it all in one go. 

• In a market when prices generally rise over time

Andrew will do better than Eliza. This is because he invested his whole £12,000 at the beginning of the year, when prices were at their lowest. Andrew makes £3,120 over the year, which is £2,038 more than Eliza.

• In a market when prices fluctuate but don't go much higher overall

Eliza does better by regularly investing £1,000 each month. This is because she bought investments at different prices, which averaged out at a lower price than Andrew paid (so she gets more investments for her money). As a result, Eliza's investments are worth £1,977 more than Andrew's by the end of the year.

The examples below are based on illustrative scenarios, not real market returns. Investment values can fall as well as rise and so outcomes can be different depending on market conditions. Charges would also apply and reduce any returns.