How to invest with little money?
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There are lots of ways you can invest and with so many investment apps and robo-advisors on the market you can start with just a few pennies. This guide explains the different ways you can invest with little money and explains what you need to know about micro investing apps.
Ways to invest with little money
If you only have a small amount of money to invest, you still have lots of options available to you. Most of these are based around a more passive investment style, where you use robo-advisors, ETFs, or trusts to spread your money over as wide an area as possible. However, you can still take more active control if you like.
Here are 6 of the best ways to invest with a small starting pot of money.
1. Micro investing apps
Micro investing apps allow you to invest small amounts of money consistently into the stock market. Micro investing apps work by rounding up your everyday spending to the nearest pound and investing the additional money into stocks or ETFs. The whole process is automated and you just need to connect an app to your bank card or account. Moneybox is a top rated micro investing app in the UK.
Using micro investing apps is one of the easiest ways to invest with little money. Not only do they offer a hands off approach, but they give you the ability to invest in some of the largest companies in the world through fractional shares; where you can own a half or a quarter of a share in a large company that might otherwise be out of your price range.
This approach is a great for those who are just starting out. It’s often the best approach for student investors or new graduates who have just taken their first job. Essentially, anyone who makes a lot of small, regular purchases.
2. Robo advisors
Robo-advisors are automated investment apps that offer a completely hands-off approach to growing your money. They are easy to use, have low costs, and most allow you to invest with a small amount of capital. Getting started with a robo-advisor takes just a few minutes. Nutmeg is a well known robo-advisor in the United Kingdom.
All you have to do is download an app, fill in a questionnaire about your goals and how much risk you’re willing to accept, and the software takes care of the rest. Robo-advisors use AI to automatically invest into funds which the technology matches to your criteria. These services are similar to micro-investing apps although they require you to deposit money rather than rounding up your spending.
3. Commission free investment apps
Investment apps and platforms are the best option if you want to make decisions about where your money is being invested yourself. Keeping costs down is important when you’re starting with little money and many of the best known brokerage firms now let you invest without paying a commission.
Many apps have low minimum deposit requirements, and you can invest from as little as £1 in some cases. Thanks to fractional shares you’ll be able to hold some of the biggest names on the stock market without paying thousands per share. You’ll also find other assets in addition to stocks and shares, so you’ll have a wider choice to invest in.
4. Stocks and shares
You can invest in stocks and shares of companies that are expected to grow in value over the long term. Growth stocks can produce large returns, even from a small initial investment as long as you’re prepared to stay patient. When investing in growth stocks, you can always continue to add money over time.
Another approach you can take is to invest in dividend paying stocks. These companies reward their shareholders with regular payments known as dividends. Investing in dividend stocks is a good way to earn an income which you can then reinvest into other assets to grow your pot.
5. Low cost ETFs and funds
ETFs and funds track the performance of a specific industry or sector and make it an easy way to invest with little knowledge or money. Funds and ETFs both usually have management fees although they can be very inexpensive compared to other forms of investing.
You can use a commission free investment app or platform to invest in ETFs and funds and many of the best platforms offer research to help you pick the best performers. Most robo-advisors invest into funds although taking a DIY approach can work out slightly cheaper as you wont have management fees for using an automated service.
6. Savings accounts
While a savings account isn’t really considered a form of investing, using one is still an easy way to grow your money. The interest you can earn from most savings accounts is not particularly high although it is possible to obtain higher yields if you’re prepared to keep your money tied up for a longer period of time.
Some savings accounts often offer better rates of interest if certain conditions are met such as lock in period and amount saved. If you don’t want to use a traditional savings account from a bank, there are now lots of other options available. Crypto companies like Nexo offer fixed interest rates on your savings and are generally much higher than a bank.
What brokers can I use to invest with little money?
The brokers below all have low minimum deposits and low trading fees. They are perfectly suited to an investor who wants to get started but only has a little money to begin with. Just click on any of the links to register an account and get started in minutes.
What should I do next?
Now that you’ve learned about the different options available for investing with little money you may want to get started. You’ll need to use an online brokerage account or investment platform and you can check out our recommendations above. Alternatively, if you want to learn more about investing you can check out our many free courses on the stock market and other assets.
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