There are three reasons as to why ‘early bird’ investing could deliver better returns:

1) Bull markets favour early bird investors as they get in earlier and therefore at a lower level

2) The early bird benefits from an extra year’s dividends on their investment which also benefit from further growth

3) Early bird investing means you don’t end up trying to time or second guess markets.

According to the research from Architas which analysed the difference in returns of the annual ISA allowance invested in the FTSE All Share (excluding charges) between 2007 and 2017, investing a lump sum at the start of the year returned £6,627 more than leaving it to the last minute.

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As such, investing at the start of the tax year would have seen investors with a total of £165,161 compared with £158,534 for those waiting until the end of the tax year.

Adrian Lowcock, investment director at Architas, said bull markets (the last which began in 2009) particularly suit early bird investors as they get the full sum invested sooner rather than later so effectively get more exposure to a rising market.

“This explains why, even when the first year has provided a negative return the early bird benefits longer-term. They get a boost to their annual investment returns from the early additional ISA contribution.

“In 2017 the early bird investor has continued to benefit from a combination of a significantly increased ISA allowance and from dividends being reinvested. Overall it is good to be early and time in the market matters more than timing the market. Whether you are an early bird or last minute investor both should benefit from staying invested over the longer-term.”

However, Lowcock understands that not everyone can maximise their ISA allowance at the start of the tax year and therefore regular savings are an effective way to invest.

“This method tends to be particularly useful during volatile markets, such as we saw during the financial crisis and have seen to a certain extent so far this year. But perhaps most importantly regular savings is a good discipline and suits most people as they receive a monthly salary.”

‘Investors could be over £10,000 better off’

Similar research from Fidelity International revealed that investors could be over £10,000 better off by being an ISA early bird compared to a last minute ISA investor.

It looked at the investing habits of three hypothetical ISA investors – ‘Early Shirley’, ‘Last Minute Lara’ and ‘Monthly Monty’ – over the past decade.

Here’s what it found:

Early Shirley invests her full ISA allowance into the FTSE All Share on 6 April each year and has done so over the past ten years. By being an ISA early bird, she would have seen her original investment of £123,560 grow to £180,298.

Monthly Monty also starts his investments at the start of the tax year, investing his full allowance in the FTSE All Share over the past decade. However, he prefers to split his full ISA allowance equally over twelve months. With this strategy, he would have seen his investment of £123,560 grow to £176,962.

Last Minute Lara waits until the very last day of each tax year to invest her full ISA allowance into the FTSE All Share, and as such her £123,560 would be worth £170,128 after 10 years – over £10,000 less than Early Shirley and nearly £7,000 less than Monthly Monty.

Ed Monk, associate director for personal investing at Fidelity International, said: “When it comes to your savings and investments, it’s easy to find an excuse to put it off but as our analysis shows, it’s the early bird ISA investor who catches the best returns.

“By being an Early Shirley and making the most of your ISA allowance at the at the start of each tax year, the more time you have to reap the rewards and benefit from the magic of compounding – the repeated addition of investment returns to both your original savings as well the returns already achieved on that starting amount.”