Drip Feeding v Lump Sum?
Discussion
I wondered what peoples views were on drip-feeding an ISA v putting in a lump sum now?
Let's assume the money is there to do either.
My inclination was to actually do both, put in around 50% now and feed the other 50% over the next 12 months.
I believe the idea is that drip-feeding can smooth out volatility but statistically you usually return a little less.
Let's assume the money is there to do either.
My inclination was to actually do both, put in around 50% now and feed the other 50% over the next 12 months.
I believe the idea is that drip-feeding can smooth out volatility but statistically you usually return a little less.
This is far felt my area of expertise, but being faced with a similar choice.
I'm a subscriber to 'time in the market' vs 'timing the market', but given the general volatility in the market in recent weeks and the possibility of it continuing due to The Donald, I'm leaning towards a drip feed initially, and a lump sum if and when things calm down a bit.
I realise that makes me a bit of a hypocrite.
I'm a subscriber to 'time in the market' vs 'timing the market', but given the general volatility in the market in recent weeks and the possibility of it continuing due to The Donald, I'm leaning towards a drip feed initially, and a lump sum if and when things calm down a bit.
I realise that makes me a bit of a hypocrite.
Testaburger said:
This is far felt my area of expertise, but being faced with a similar choice.
I'm a subscriber to 'time in the market' vs 'timing the market', but given the general volatility in the market in recent weeks and the possibility of it continuing due to The Donald, I'm leaning towards a drip feed initially, and a lump sum if and when things calm down a bit.
I realise that makes me a bit of a hypocrite.
Not really, that's exactly why I'm asking I'm a subscriber to 'time in the market' vs 'timing the market', but given the general volatility in the market in recent weeks and the possibility of it continuing due to The Donald, I'm leaning towards a drip feed initially, and a lump sum if and when things calm down a bit.
I realise that makes me a bit of a hypocrite.
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hstewie said:
hstewie said: I believe the idea is that drip-feeding can smooth out volatility but statistically you usually return a little less.
There's a bunch of research on the matter.This http://www.efficientfrontier.com/ef/997/dca.htm (apologies for formatting) is my favourite.
Typically lump sum investing comes out ahead 2/3 of the time, drip feeding the other 1/3 (essentially when you're drip feeding into a falling market) Deciding if the market is going to go up or down over the drip feeding period is left as the exercise for the reader.
Good article, I think I'll go with plan A which is the 50/50 split and average with 50%.
I was watching the Fundsmith AGM where even Terry Smith says he can't time the market and as I'm going for quality stock funds I'm not sure it should be so critical as some other types of funds (he says crossing his fingers).
I was watching the Fundsmith AGM where even Terry Smith says he can't time the market and as I'm going for quality stock funds I'm not sure it should be so critical as some other types of funds (he says crossing his fingers
).There's an old saying that 'time in the market beats timing the market', and for my money that applies to the pound-cost averaging / drip-feeding / lump sum question. I prefer to sort out my investments once every tax year (i.e. last weekend) then not worry about it until next year, so lump sum works for me.
bhstewie said:
hstewie said: I was watching the Fundsmith AGM where even Terry Smith says he can't time the market and as I'm going for quality stock funds I'm not sure it should be so critical as some other types of funds (he says crossing his fingers ).
you might find it fascinating to take the monthly returns table from https://www.fundsmith.co.uk/fund-factsheet , drop it in to Excel and calculate the average return in each calendar month as well as the standard deviation of the return in each month.).xeny said:
you might find it fascinating to take the monthly returns table from https://www.fundsmith.co.uk/fund-factsheet , drop it in to Excel and calculate the average return in each calendar month as well as the standard deviation of the return in each month.
No I really wouldn't 
I think I've about settled on not over-complicating things and just focusing on three funds with similar investment "styles".
I've a long time to go so time will tell but I think it gives me enough diversification that I won't be pratting about trying to work out how to split 8-9 funds.
The way I see it:
You drop £20k in an S&S ISA, the market tanks 3 days later. You're fuming.
You drop £20k in an S&S ISA, the market creeps up slowly. You're indifferent.
You drip feed £1k in an S&S ISA, the market tanks 3 days later. You breathe a sigh of relief as it could have been a lot worse.
You drip feed £1k in an S&S ISA, the market creeps up slowly. You're indifferent.
You drop £20k in an S&S ISA, the market tanks 3 days later. You're fuming.
You drop £20k in an S&S ISA, the market creeps up slowly. You're indifferent.
You drip feed £1k in an S&S ISA, the market tanks 3 days later. You breathe a sigh of relief as it could have been a lot worse.
You drip feed £1k in an S&S ISA, the market creeps up slowly. You're indifferent.
bhstewie said:
hstewie said: Good article, I think I'll go with plan A which is the 50/50 split and average with 50%.
I was watching the Fundsmith AGM where even Terry Smith says he can't time the market and as I'm going for quality stock funds I'm not sure it should be so critical as some other types of funds (he says crossing his fingers).
FWIW, that is the approach I would take as well. I was watching the Fundsmith AGM where even Terry Smith says he can't time the market and as I'm going for quality stock funds I'm not sure it should be so critical as some other types of funds (he says crossing his fingers
).Hoofy said:
The way I see it:
You drop £20k in an S&S ISA, the market tanks 3 days later. You're fuming.
You drop £20k in an S&S ISA, the market creeps up slowly. You're indifferent.
You drip feed £1k in an S&S ISA, the market tanks 3 days later. You breathe a sigh of relief as it could have been a lot worse.
You drip feed £1k in an S&S ISA, the market creeps up slowly. You're indifferent.
Obviously as you're comparing creeping with tanking in both scenarios! You drop £20k in an S&S ISA, the market tanks 3 days later. You're fuming.
You drop £20k in an S&S ISA, the market creeps up slowly. You're indifferent.
You drip feed £1k in an S&S ISA, the market tanks 3 days later. You breathe a sigh of relief as it could have been a lot worse.
You drip feed £1k in an S&S ISA, the market creeps up slowly. You're indifferent.
Swap the tanking for growing solidly and how does that change your mind?
Badda said:
Hoofy said:
The way I see it:
You drop £20k in an S&S ISA, the market tanks 3 days later. You're fuming.
You drop £20k in an S&S ISA, the market creeps up slowly. You're indifferent.
You drip feed £1k in an S&S ISA, the market tanks 3 days later. You breathe a sigh of relief as it could have been a lot worse.
You drip feed £1k in an S&S ISA, the market creeps up slowly. You're indifferent.
Obviously as you're comparing creeping with tanking in both scenarios! You drop £20k in an S&S ISA, the market tanks 3 days later. You're fuming.
You drop £20k in an S&S ISA, the market creeps up slowly. You're indifferent.
You drip feed £1k in an S&S ISA, the market tanks 3 days later. You breathe a sigh of relief as it could have been a lot worse.
You drip feed £1k in an S&S ISA, the market creeps up slowly. You're indifferent.
Swap the tanking for growing solidly and how does that change your mind?
I’ve been investing a chunk of inheritance money, which I started about the second week in January just before the correction. I had a feeling that the market could fall, and I’m very glad I have been drip-feeding weekly amounts. The result is that I’m about 2.4% down, compared to the market being roughly 8% down since I started. Not a bad result!
Drip-feeding partly shields you from a falling market, but fails to expose you to the full benefit of a rising market. There is no right or wrong answer; it depends whether you want to protect what you’ve got or go for the best growth you can hope for. It also depends on what you think the market is likely to do over the early part of your investment period.
Drip-feeding partly shields you from a falling market, but fails to expose you to the full benefit of a rising market. There is no right or wrong answer; it depends whether you want to protect what you’ve got or go for the best growth you can hope for. It also depends on what you think the market is likely to do over the early part of your investment period.
Dr Mike Oxgreen said:
I’ve been investing a chunk of inheritance money, which I started about the second week in January just before the correction. I had a feeling that the market could fall, and I’m very glad I have been drip-feeding weekly amounts. The result is that I’m about 2.4% down, compared to the market being roughly 8% down since I started. Not a bad result!
Drip-feeding partly shields you from a falling market, but fails to expose you to the full benefit of a rising market. There is no right or wrong answer; it depends whether you want to protect what you’ve got or go for the best growth you can hope for. It also depends on what you think the market is likely to do over the early part of your investment period.
Have to agree. For example this recent correction was expected, due to such a long stable growth without a correction. In that situation I didn't lump everything in at once, whereas potentially now could be a good time to put larger amounts in (if you view the market as having more to go on the upside).Drip-feeding partly shields you from a falling market, but fails to expose you to the full benefit of a rising market. There is no right or wrong answer; it depends whether you want to protect what you’ve got or go for the best growth you can hope for. It also depends on what you think the market is likely to do over the early part of your investment period.
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