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Not phasing large contributions & withdrawals

Avoid risk by spreading out your contributions or withdrawals at regular intervals.

Since 1983 the FTSE 100 index has fallen by more than 10% within 3 months (or sooner) on more than 35 occasions. If you had invested your life savings just before this happened, you’d be unhappy and probably less inclined to invest again. You might think that a skilled adviser will be able to predict falls of such a magnitude but the reality is that markets operate in a way that makes that impossible.

The only reliable approach for mitigating your risk of being unlucky with timing is to spread your bets. A common approach might be to split the investment into four chunks which can be invested at regular intervals over 12-18 months.

If the timing of a phase is in the middle of a period of market turbulence you might be tempted to wait but this must be resisted. Stay rational and stick to the plan.

EQ tip: phasing takes much of the stress out of large new investments or withdrawals.

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