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&#39Monthly savings beat lump-sum investments&#39

Investors making monthly contributions have fared significantly better over the past three years than those who have invested a lump sum, according to research from Hargreaves Lansdown.

HL has found that monthly savers often enjoy positive returns regardless of whether there is a bear or bull market while their lump-sum counterparts only do well in a bull market.

The company says investors paying £100 a month into an average all companies fund in the three years to December 2003 would have seen a return of £3,829 while a £3,600 lump sum would have slumped to £2,929.

Monthly savers would also have done well in the late 1990s but HL says lump-sum investors are always at a significant advantage in such circumstances.

In the three years to December 1999, the same monthly savers would have seen returns of £4,955 but lumpsum investors would have seen their £3,600 rocket to £6,219.

HL says the research shows how investors should not fear putting money in equities even during a bear market.

Senior analyst Meera Patel says: “In a bear market, people are afraid to invest but they should stick with regular savings, which tend to do better. On average, in a bull market, both types of investment make money but, generally, in a bear market only regular savings do.”

But M&G, which, like many fund firms only has a small percentage of monthly savers, argues lump sum investors, although more prone to worrying, will usually come out top.

Managing director Phil Wagstaff says: “If the market goes down and you are a regular saver, you feel fine because you know you will be buying more units next month. But if you think that markets are going to rise in the long term, you should be putting in a lump sum.”

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