The power of regular investing

Want an affordable way to build up an investment pot without having to second guess market movements? We have the answer

If you want to invest in the stock market but aren’t able or willing to put in a large lump sum, you can invest using a stockbroker’s regular investment service. This is an affordable way of building up an investment pot and it avoids you having to second-guess market movements, writes Emily Perryman, personal finance editor, Shares magazine.

AJ Bell Youinvest lets you invest from just £25 a month into its regular investment service, which is available in its dealing account, ISA, Junior ISA and Self-Invested Personal Pension (SIPP).

Lower dealing fees

The dealing fees associated with regular investing are much lower than traditional share and fund dealing. Dealing costs at AJ Bell Youinvest are £1.50 per regular investment purchase and standard dealing charges apply for sales. This compares to its usual share dealing fee of £9.95 (or £4.95 if you make 10 or more transactions a month) and its usual charge for an online fund purchase of £4.95.

Click here to open a dealing account in minutes

Pound cost averaging

As well as being cheaper, regular investing helps you smooth out the ups and downs of the market, which is very important in times of market turbulence. According to figures from the Association of Investment Companies*, in the five years to 31 May 2013, which included the credit crunch and recession, investing £50 a month in the average investment company would have grown to £4,140 whereas the equivalent lump sum would have grown to £3,893.

‘So when prices are high you will buy fewer shares or fund units but when prices are low your regular investment buys more shares or fund units. This process is known as ‘pound-cost-averaging,’ says Charles Galbraith, managing director of AJ Bell Youinvest.

‘You avoid having to worry about trying to make money by timing the markets and can instead hopefully let the markets turn time into money, in the form of patiently accrued capital gains and dividends,’ he adds.

Range of assets

Stockbrokers have a specified list of funds, tracker funds and investment trusts which you can invest in via their regular investment service. It’s also possible to invest in shares, although these are usually limited to FTSE 350 stocks.

Once you’ve chosen which assets you want to invest in your orders will be dealt on a day of the month specified by your stockbroker; at AJ Bell Youinvest it’s the 10^th calendar day of the month. You can edit and adjust your regular investment orders at any time, right up until midnight before the dealing date.

If you’re making regular investments into an ISA or Junior ISA it’s important you don’t go over the annual tax-free allowance. For the 2015/16 tax year the maximum you can pay into an adult ISA is £15,240 and the maximum you can pay into a Junior ISA is £4,080.

Click here to open a dealing account in minutes

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Please note the value of investments, and any income from them can go down as well as up and you may not get back your original investment. AJ Bell Youinvest do not offer advice about the suitability of their products or any investments held within them. Should you require financial advice you should consult a suitably qualified financial adviser. Tax rules can change in the future and the tax treatment depends on your personal circumstances. Past performance is not a guide to future performance and some investments need to be held for the long term.

AJ Bell is authorised and regulated by the Financial Conduct Authority. The Independent is not responsible for the content of this advertisement feature and any queries should be directed to AJ Bell.