Recurring investments offer a simple, disciplined way to grow your portfolio by setting up automated contributions. Our guide explains how they work and why they suit long-term investors.
For many new investors, investing feels overwhelming. To be fair, there’s plenty of jargon to learn and timing worries to accept — and the fear of making a wrong move is firmly ingrained against the fruits of longer-term wealth building.
But it doesn’t have to be complicated. In fact, one of the most powerful investment strategies is also one of the simplest: recurring investments.
When you commit to recurring investments as a long-term strategy, you invest a fixed amount of money on a regular schedule — for example, weekly, fortnightly or monthly. Instead of trying to time the market or wait for the ‘perfect’ moment to invest additional capital, you steadily build your portfolio over time, making the most of consistency, automation and the magic of compounding.
It’s similar to setting up a standing order to pay a regular household bill like water or electricity, but instead of paying a bill, you’re building your own long-term wealth through regular investing in assets like stocks, mutual funds, ETFs or REITs.
The core of recurring investments is discipline over timing. You don’t try to predict market highs or lows. Instead, you invest consistently, regardless of what’s happening in the market. Naturally, this method aligns with the concept of pound-cost averaging — though there are some differences between the two, as explained below.
For those looking to set up recurring investments, here's a straightforward approach:
Investors seek to grow their capital through share price appreciation and dividends — if dividends are paid. However, investment values can go down as well as up, past performance does not guarantee future results, and you may get back less than your original investment.
We also offer our IG Smart Portfolio service which auto-invests dependent on your risk attitude. These portfolios are based on asset allocation insights and research provided by Blackrock, the world’s biggest asset manager.
They’re expertly managed by our portfolio managers on a discretionary basis, where we make changes to the portfolios based on valuations, market sentiment and outlook.
After opening an account with an initial deposit of £500 or more, clients can also set up a regular monthly payment into their Smart Portfolio to take advantage of the ebbs and flows of equity and bond markets.
Let’s assume you invest £250 every month into a diversified ETF. With an average annual return of 7%, here’s what your investment could look like over time, roughly:
That’s the power of consistent investing and compounding returns — all without needing to time the market or make huge sacrifices upfront. Of course, this does assume a 7% annual return, which is not guaranteed. And as ever, past performance is not an indicator of future results.
Recurring investments work best when paired with a long-term mindset. Here are some of the key principles to consider:
While recurring investing is a popular strategy with many investors, it works particularly well for
those with long-term goals. Whether you’re saving for early retirement, a first home or perhaps a child’s education, making regular contributions provides a methodical path toward building wealth over time.
The approach is also ideal for navigating volatile markets. By investing consistently, you smooth out the effects of market ups and downs — in other words, you will end up buying more shares during market dips and fewer during price spikes. Over time, this can help to reduce your overall portfolio risk and potentially improve returns.
For people with busy lifestyles, recurring investing also offers a low-maintenance financial solution. If you don’t have the time or desire to constantly research and monitor your investments, setting up regular contributions takes the guesswork and stress out of managing your portfolio.
Finally, in uncertain economic climates (and it’s fair to say we’ve seen significant uncertainty over the past few years), recurring investments provides stability through regularity. Consistently adding helps to maintain your progress and also perhaps some peace of mind, even when external conditions feel unpredictable.
Recurring investments involves putting a fixed amount of money into an investment regularly regardless of market conditions. This approach helps reduce the impact of market volatility by spreading purchases over time, buying more shares when prices are low and fewer when prices are high.
It encourages disciplined investing and can be easier for many investors to manage financially, as you commit smaller sums consistently instead of a large one-time outlay. Over the longer term, recurring investments can smooth out average purchase prices and help to reduce any emotional reactions to market swings.
Lump sum investing involves deploying a large amount of capital all at once into the market. This strategy benefits from the potential of immediate market exposure, which historically has led to higher returns over time since markets generally trend upward.
However, it carries the risk of investing right before a downturn, which could temporarily reduce your portfolio value. Lump sum investing is usually more suitable for investors who have a higher risk tolerance — and also requires having the lump sum to invest in the first place.
Both methods are popular, but many investors enjoy a hybrid approach — investing a lump sum when available (like an end of year bonus or inheritance) and then continuing to top up this initial deposit with recurring investments.
While these two concepts overlap, there are some differences.
A recurring investment involves automatically putting a fixed amount of money into an investment at regular intervals, such as weekly or monthly, regardless of how the market is performing. For example, you might set up a standing order to invest £250 every month into an ETF — and while the amounts invested are consistent, the strategy does not adjust for market prices.
In contrast, a pound-cost averaging strategy is often used when investing a large lump sum gradually over a period of time to reduce the risk of investing all at once, potentially at a market peak. The idea is to spread out the total amount into smaller, regular investments, for example, £1,000 each month for 12 months rather than investing £12,000 all at once.
This is similar, as it also helps smooth out the average purchase price by buying more shares when prices are low and fewer when prices are high, thereby reducing the impact of market volatility.
The main difference between the two lies in their intent. Recurring investments are often funded directly from regular income and intended to build a position over the long term without a defined end date. Pound cost averaging, on the other hand, is commonly a deliberate risk management technique applied when you have an existing lump sum to invest over a set period.
As with all investing strategies, recurring investments have their own set of advantages and drawbacks: