Investing your ISA early could leave you £10,000 better off

Savings and ISAs

Updated on 17 April 2015 | 1 Comment

Early investors end up much better off than those that leave it late.

Early bird ISA investors could be more than £10,000 better off than those who leave it until the end of the tax year.

According to research by Fidelity Personal Investing, early investors gain significantly higher returns than those who invest at the last minute. This is because your early returns are then reinvested, essentially creating a snowball effect.

The examples below are based on investors who put in their full ISA allowance each year over the past decade into the FTSE All Share Index.

 

Total invested, using their full ISA allowance each year since the 2004/5 tax year

Final pot today

Investor A: the lump sum early bird, who starts investing at the beginning of the new tax year

£101,080

£154,055.13

Investor B: the monthly saver, who splits their ISA payments equally each month and starts investing at the beginning of the new tax year

£101,080

£150,176.58

Investor C: the lump sum last minute investor, who leaves it until the last day of the tax year, each year to invest

£101,080

£143,850.66

Source: Fidelity Personal Investing, April 2015

You can see from these figures that investors who get in there early could be more than £10,000 better off than those who jump in at the last minute.

And even if you don’t have a lump sum to invest at the beginning of the tax year, it’s worth thinking about regular monthly savings because, as you can see from the table, Investor B still did substantially better than Investor C.

Nutmeg published a similar study last week using smaller investments. In its example, two investors put £10,000 into a medium-risk portfolio for 10 years, one early and one at the last minute. The early bird could have built up more than £8,000 in additional returns, reinforcing how much of an impact early investment can have.

Enjoy tax-free returns from the stock market with a Stocks & Shares ISA

More on ISAs and investing:

The best Cash ISAs for the 2015/16 tax year

Beginner’s guide to Stocks and Shares ISAs

Sneaky hidden charges for investors to avoid

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