Half of savers wait until the last minute to make investments and rush them into the last week of the tax year: bad habit could cost savers £15,500
Half of savers wait until the last minute to invest and rush through in the last week of the tax year, new data shows.
Still, this bad habit can cost you more than £15,500 in 30 years and is a poor investment strategy.
If you invest sporadically or in large amounts, you miss out on compound growth and you are more exposed to stock market fluctuations.
According to asset manager True Potential, 52 percent of all funds invested through its smartphone app are transferred in the last eight business days of the fiscal year, between March 27 and April 5.
Tax-free reimbursements on the amount you can put in Isas reset every year. Those who miss the deadline miss out on tax-free profits, which is why so many are rushing to meet the date. But putting your money into an Isa just before closing puts you at unnecessarily high risk, says True Potential.
Bad Practice: Investing a large amount sporadically or all at once will miss out on compound growth and leave you more exposed to stock market fluctuations
The director Daniel Harrison says you should think about investing the same way you would with direct debits, so you invest at the beginning of the month when you get paid or pay other bills. By investing consistently, your investments can snowball and benefit from compound growth.
The average investor who dribbles into their savings every month would be £15,548 better off over 30 years, finds True Potential.
For example, if you invest £6,828 (the average amount paid into a True Potential Isa last year) in stocks and shares of Isa at the end of each tax year, you could expect to have £556,021 after 30 years, given a 6 per cent annual return.
If you invested the same amount each month, equivalent to £569, the return on your investment would rise to £571,569 – a difference of £15,548.