How a simple Direct Debit can take the hard work out of investing

3 min read 18 Jun 23

Smart investors add to their investment portfolio on a regular basis. Putting something away, for example every month is hardly a new idea. If you have the right investment product, then whatever you can afford to add each month can both boost your investment and help it grow.

The easiest way to make regular contributions to your investment is the same way you make any regular payment: by Direct Debit. Once you’ve set it up, you can rest assured in the knowledge that you’re adding to the pot on a regular basis, and leaving the whole thing to potentially grow steadily over time.

But please remember, that the value and income from a fund’s assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested.

Your finances in your pocket

It’s easy to set up a Direct Debit with M&G. You can call our Investment Helpline or complete the relevant application form. You can also stop your Direct Debit, restart it, increase or decrease the amounts depending on what’s happening in your life.

If you choose an Individual Savings Account (ISA), it makes sense to maximise your tax-allowances by setting the amount you invest each month, so you reach your full £20,000 limit by 5 April. For example, if you were to start investing on 1 July, £2,000 each month would get you there in ten payments. Alternatively, you might want to start with a lump sum, say for example £5,000, and add ten monthly payments of £1,500.

Whatever your circumstances, setting up regular payments to build your ISA or other investments can potentially be a way to make the most of your money.

The tax rules for ISAs may change in the future, and their tax advantages depend on your individual circumstances.

The smarter way to invest

The reason regular payments work so well is that it can help with ‘pound cost averaging’. This is investing a fixed amount at regular intervals, each month for example, regardless of the ups and downs of the market. Investing regularly means that when the investment price goes down, you potentially get more for your money, which can help lower the average cost of your investment over time. In our view, the best way to make money from the stockmarket isn’t to buy low and sell high over the course of a morning. Those kind of trades do happen, but they really are best left to the professionals.

For most of us, it’s the steady rise of the stockmarket over the long-term (with five years, ten years or even longer in mind) that grows our investments. It doesn’t matter so much if the value of your investment moves up and down week by week as there’s more time to recover any dips in value along the way. 

By setting up a Direct Debit, you can keep adding to your investment without doing a thing. The sooner you start, the sooner your money can get to work for you.

The views expressed here should not be taken as a recommendation, advice or forecast. We are unable to give financial advice. If you are unsure about the suitability of your investment, speak to your financial adviser.

By M&G Investments

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