Data from the Association of Investment Companies released today (9 February) reveals even near the top of the market, on average, lump sum investment company investments are outperforming the equivalent amount fed into the market on a monthly basis over the long-term.
However, the research showed that the figures are close.
According to the AIC, a £50 per month investment in the average investment company since the end of September 2007 prior to the credit crunch (a total of £5,000) has grown to £7,402, as at the end of January 2016.
The research showed an equivalent lump sum investment of £5,000 in the average investment company over the same time frame would now be worth £7,671.
Over a long time period, the lump sum figures are a lot better than the regular saving figures.
According to the AIC, a £50 investment in the average investment company at the end of February 2000 prior to the tech crash (a total of £9,550) would now be worth £20,821 as at the end of January 2016.
The equivalent lump sum investment in the average investment company over the same time period would now be worth £25,564.
Share price total return
Performance from | 29/02/2000 | 29/02/2000 | 30/09/2007 | 30/09/2007 |
Performance to | 31/10/2002 | 31/01/2016 | 28/02/2009 | 31/01/2016 |
Duration years.months | 2.08 | 15.11 | 1.05 | 8.04 |
£1,000 Lump sum |
|
|
| |
Sum invested | £1000 | £1000 | £1000 | £1000 |
Overall weighted average | 660 | 2,680 | 580 | 1,530 |
£50 Regular savings |
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| ||
Sum invested | £1,600 | £9,550 | £850 | £5,000 |
Overall weighted average | 1,159 | 20,821 | 591 | 7,402 |
Lump Sum Equivalant of Regular Savings |
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| ||
Sum Invested | £1,600 | £9,550 | £850 | £5,000 |
Overall weighted average | 1,063 | 25,564 | 497 | 7,671 |
Source: AIC using Morningstar, whole industry ex 3i, ex VCTs
Annabel Brodie-Smith, communications director at the Association of Investment Companies, said clearly market timing can have a significant impact on returns but it is very difficult to get right.
She said: “The market is currently significantly down on its April high but the data demonstrates that long-term investors who invested in investment companies close to the market high and then held on through the bear market have received positive returns.
“An investment in the average investment company prior to the credit crunch bear market is still up 53 per cent today. Whilst lump sum investing has outperformed monthly investing over the long-term, there is not much difference in performance between the two types of investing since the credit crunch.
“Regular investing can be a useful way of reducing your risk profile because investors buy fewer shares when prices are high, and more when prices are low.
“Over much longer time periods, because lump sum investments have more money working from day one, it’s not surprising to see lump sum investing outperforming strongly.”
Daren O’Brien, director at Aurora Financial Solutions, said that investors always worry during volatile markets, especially when their investments are falling.
“The data does confirm that holding your portfolio (and nerve) over the longer period still provides excellent growth potential for regular and single investments.”
ruth.gillbe@ft.com
