How timing your ISA contributions could earn you an extra £30,000

Are you an early bird, last-minute or drip-feeder investor? While the early birds get the proverbial ISA worms, is there a better option in falling markets?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Close-up of British bank notes

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

This is an important week for ISA investors. Are you a last-minute investor scrambling to use or lose your ISA allowance before the current tax year ends on 5 April? Or are you an early-bird investor with next tax year’s ISA allowance ready to invest come 6 April? Alternatively, you may be a drip-feeder who prefers to make monthly contributions given the current volatility of global stock markets.

Whatever your investing habits, the timing of your contributions can have a surprising impact on the value of your ISA over time. I’m going to take a closer look at which investing strategy would have delivered the highest returns over the last 20 years.


How does the timing of ISA contributions impact returns?

I’ve calculated the value of an ISA pot assuming an investor has made the maximum possible contributions of £272,000 since ISAs were introduced in 1999:

  • The annual growth rate is based on the MSCI World Price Return index each year (excluding income).
  • The ‘early bird’ is assumed to make their contribution on the first day of each tax year and the ‘last-minute’ investor on the final day.
  • The ‘drip feeder’ is assumed to make their contribution on the first day of each month, and a compound monthly growth rate based on each year’s annual growth rate has been applied.

This table shows the current value of the various investing strategies:


Type of investor

ISA value


The early bird



The drip feeder



The last-minute investor


All three investors would more than double their money thanks to the average growth rate of nearly 7%. The early bird wins the race with an ISA worth £32,000 more than the last-minute investor, mainly due to the power of compound growth on the ‘extra’ year’s return.

The habit of investing early in a tax year is also shared by ISA millionaires. Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments that the millionaires “consistently invest as much as possible of their annual allowance, as early as possible in the tax year … and they’ve done this every year for decades.”

However, investing later in the tax year can have its advantages, as shown below:


Annual return

Early-bird ISA

Last-minute ISA













While the early-bird ISA performed better in rising markets, the reverse was true in market downturns. The value of the last-minute ISA overtook the early-bird ISA after the fall in global stock markets from the dot-com crash. And the last-minute ISA also ‘caught up’ with the early-bird ISA in 2009-2011 after the global financial crisis.

But not everyone has the luxury of available funds to invest at the beginning of the tax year. So is drip-feeding contributions into your ISA a good compromise?

What are the merits of making monthly ISA contributions?

The drip feeder’s ISA took second place, in the middle of the values of the early bird and last-minute investor. While drip-feeding contributions on a monthly basis may sacrifice returns in a rising market, it’s a good option in falling or volatile markets.

Most investors want to buy low and sell high, but in reality, this is almost impossible to achieve. Monthly investing allows you to benefit from pound-cost averaging. When prices fall, you can buy more investments with your money.

What type of investor might drip-feeding suit? Well, Eve Maddock-Jones from Trustnet comments that, for less experienced investors, “building up their total over time” can be “more palatable, removing some of the intimidation of letting go of your entire pot in one go.”

She also points out that cautious investors may prefer this approach as a “less volatile way to invest” compared to the “gut-wrenching ride” to achieve the higher returns of the early-bird lump-sum investors.

It may also work well for investors who want to use their ISA as a monthly savings plan. Hargreaves Lansdown and Interactive Investor, two of our top-rated ISA providers, allow customers to make monthly ISA contributions from £25 upwards.


Take away

If you have the available funds, investing a lump sum in your ISA at the beginning of the tax year “gives you the advantage of time, which is always the most precious commodity” according to financial advisory firm FAS. They advise that “Using your ISA allowance early can make a real difference to the returns on your investment.”

However, they also rate monthly investing as “a simple way of taking the guesswork out of investing, avoiding uncomfortable market highs and lows.” Given the current market volatility, monthly drip-feeding could be a good strategy for a wide range of investors over the next few years.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »