Interactive Investor

Ask ii: does it really pay off to be an early bird ISA investor?

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3rd May 2024 09:32

by Kyle Caldwell from interactive investor

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Keith asks:I have seen plenty of articles over the years extolling the benefits of investing at the start of a new tax year. But does being an early bird ISA investor really make a difference?" 

Kyle Caldwell, collectives editor at interactive investor (pictured above), says: various number crunching over the years shows that if you can be an early bird ISA investor, you will tend to do better than those who leave it to the end of the tax year.

The latest analysis carried out by interactive investor compared the performance of an early bird ISA investor versus a last-minute ISA investor from April 1999 to April 2022.

Assuming the full ISA allowance was invested each year into the average global fund, our analysis found that investing at the start of the tax year (6 April) would have turned a total contribution of £263,440 into £667,187. Whereas, investing at the end of the tax year (5 April) would have generated £629,555.

The key reason why being an early bird ISA investor tends to pay off is due to the almost extra year of investment. So, there’s more time to benefit from the wonders of compound interest, which is where your investment returns themselves generate future gains.

The reality is that most investors are not able to max out the annual ISA allowance of £20,000, but the same principle applies to smaller amounts. By putting some money in at the start of the tax year, if you can, it will give your investments more time and opportunity to hopefully grow. 

Its important to remember that being an early bird ISA investor does not eliminate the risk of unfortunate market timing. Those investors concerned about putting money into the market just before a nasty dip can reduce risk by investing monthly throughout the year.

Similar to household bills, you can set up a direct debit to take a specified amount out of your bank account every month. Regular investing, which is also better suited to those with smaller sums to invest, is free on the interactive investor platform.

This strategy benefits from what is known as pound-cost averaging. When stock markets fall, the regular investment purchases more shares or fund units. Conversely, when stock markets rise, fewer shares and fund units are bought.

Generally speaking, when markets are buoyant, lump-sum investing wins out over investing regularly on a monthly basis. However, regular investing gives investors more peace of mind. My colleague Craig Rickman goes into more detail here comparing lump sum versus regular investing.

As well as having money invested in the markets for longer, being an early bird ISA investor means you are less likely to be caught up in making hasty last-minute decisions that you may end up regretting.

This question was answered in our latest On The Money podcast episode, which focused on tackling topics submitted by listeners. If you have an investment-related question you would like the team to address in a future episode, get in touch by emailing

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.

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