How to spread £30000 investment over a long enough period of time?

Question

I have about £30000 that I could start investing now in a tax efficient way (UK ISA, which means essentially zero tax).

Since the markets are at an all-time high right now, I am thinking it would perhaps be a good strategy to spread this investment over the next 18-24 months but I am not sure what would actually be the optimal period of time over which to spread the investment.

I'm thinking about putting money on a monthly basis in a couple of investment trusts such as the "Bankers Investment Trust" or "Scottish Mortgage". I also expect to have saved more by the time I have invested the amount I have now so I could potentially keep going with the monthly investments in the trusts.

I am aware that trying to time market downturns is impossible, but is there still some way to determine over how many months I should ideally spread my investment on? At the moment, I would say I have a 7-10 years investment goal.

Thank you!

Answer 1

If you have such a long term investment goal there really is no reason to try time the markets, 1990s market high was nothing compared to 1999s market high which was nothing to 2006 etc and so on(years quoted as example).

Also consider cost of opportunity missed by holding back investing your immediately available investment capital and have it sit in a bank account for 18-24months, collecting meager returns instead of a 5-10% potential return for example(which isnt a strech by any means).

Now if you re really hell-bent on timing the market, since you re in the UK, if you really want to attempt it, I would pay close attention to Brexit news and talks that are scheduled for 2018 onwards. Any delays on that deal and/or potential bad development may lead to speculation and temporary lows for you to buy in. If thats worth the effort and cost of opportunity mentioned before is up to you.

Answer 2

It's important to remember that upward trending things spend the vast majority of their time at all time highs - intelligent, well meaning people have been regularly saying the Dow Jones has been too expensive since about 2010, often because it was now at 'all time highs':

Sitting on the sidelines can end up just as expensive (if not more so) than avoiding big drops.

If you are worried about a large down swing straight after investing just drip it in over a period you feel comfortable with - no one can really answer this better than that without more info on your risk tolerance and exactly what you want to invest in.

Worth noting that buying anything other than transaction free funds when split into small transactions also adds a lot more fees (~£10 entry and exit in a UK ISA for example). Split these over 12 months say, and it will cost you £240 straight out of the gate (2 fund purchases per month for 12 months @£10 each) and another £240 to exit before any holding fees from the ISA platform: that's over 1% of your capital gone just to your stockbroker employing this strategy.

Both the products you mention are also quite high cost in ongoing charges, so unless you have very high convictions about the management quality, will also probably lag cheaper investment types over the long run as well due to the dire performance of virtually all higher cost, active management over time.