Could investing a lump sum give you better returns?

If you're investing in a stocks and shares Isa this year, new research suggests you could get better returns by paying in a lump sum rather than drip-feeding monthly.

Analysis from financial services firm Alliance Witan found that front-loading your £20,000 stocks and shares Isa in April each year would have produced 7% higher returns over a 15-year period compared with spreading the same amount across the year in smaller monthly contributions.

But the right choice depends on your goals, appetite for risk and how much you’ve got ready to invest. Here, we explain the pros and cons of both strategies and what to consider first. 

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Should you invest a lump sum?

Alliance Witan modelled how two strategies would have performed over 15 years: investing the full £20,000 Isa allowance in April each year, or drip-feeding the same amount in monthly instalments.

The lump-sum approach came out ahead, with gains of £212,900 – around 6% more than the £199,500 achieved through monthly investing.

This seems like a clear win for lump-sum investing, but the reality is less clear, as the research also found that maxing out your Isa allowance in March each year would have produced worse results than either monthly investing or an April lump sum. 

It’s also worth noting the analysis uses the share price of Alliance Trust as a stand-in for global stock market performance, which is unlikely to be reflective of the experience of most investors.

Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown, told Which?: ‘If you pick single months and measure them against one another, one will always do better than the other. 

‘If you go back over the previous 15 years, sometimes March is strong and sometimes April is – sometimes they both are. This period did include some big dips and rises which will have made the difference, notably 2020 as Covid took hold and the world went into lockdown.’

• Find out more: best stocks and shares Isas 2025

Pros of lump-sum investing

• You can take advantage of market dips by buying more when pieces are low 
• Fewer trades mean you can pay less in charges 
• Your full investment has more time to grow, as the entire amount benefits from compound interest from the start.

Cons of lump sum investing

• If markets drop soon after you invest, you could face bigger losses
• You'll need to save up a large amount in advance
• You must be prepared to stay invested during market ups and downs

Should you drip-feed instead? 

Drip-feed investing involves making regular monthly contributions to your stocks and shares Isa. This can be a useful approach for those nervous or unwilling to part with a large sum of money all in one go.

If the stock market performs well, your shares will likely be more expensive. But equally, if the market is struggling, shares will be cheaper. So if you spread out your purchases every month, the cost should average out over time.

Investing a large sum right before a period of market volatility is a scenario everyone wants to avoid.

For example, anyone who invested a lump sum right before President Donald Trump announced his tariffs earlier this year would have seen their portfolio take quite the hit.

Investing little and often means you can more easily ride out any market fluctuations; you're buying assets at different prices on a regular basis rather than buying at just one price with a lump-sum investment.

Many investment platforms will let you set up a regular monthly payment plan via a standing order with your bank, allowing you to ‘set it and forget it’.

• Find out more: investing for beginners 

Pros of drip-feed investing

• Allows you to ride out periods of market volatility more easily
• Less pressure than investing a large sum all at once
• You still get to take some advantage of market downturns.

Cons of drip-feed investing

• You won’t be able to take full advantage of market downturns by purchasing lots of shares at a discount
• You'll need to set up a regular payment
• May result in lots of trading fees if your account is purchasing additional shares each month.

Should you time the market?

When markets hit a downturn, it can be tempting to cut your losses or change your investments. But reacting to short-term dips can mean missing out on future gains. 

Equally, it can be dangerous investing all your money attempting to ‘buy the dip’, only to see the market fall even further.

Ultimately, the best investment strategy is the one you’ll stick with, and for many, that often involves a mix of both lump-sum and drip-feed investing.

You should always have a goal in mind when investing, such as buying a house or saving for retirement. It's important you have one in mind so you can structure your investments appropriately. 

Stick with your original goal and you'll be better able to weather the inevitable financial storms.

• Find out more: compare investment platform fees and charges