How to invest £1,000

£1,000 is a good amount of capital to begin investing with and a little money can go a long way if you choose wisely. This guide helps you learn how to invest £1,000.
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Updated: Oct 12, 2022
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If you have £1000 laying around in your bank account, investing it could be a better option. This beginner friendly learn page teaches you the best way to invest your money and offers a step-by-step guide on how to do it. 

Can I start investing with £1,000?

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Yes you can, there’s no limit on how much, or how little you can invest and this guide explores the different ways you can put your money to work. The right approach to investing is different for everyone, although with a smaller amount of money it’s usually best to stick to safer investments to start with. 

How to invest £1,000 – a step-by-step guide

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Below we’ve included a step-by-step guide running through what you need to do when investing £1,000.

  1. Set your objective. Before you even begin to invest your money, it’s a good idea to have a goal in mind. Are you investing for your retirement? Saving to buy something in the future? For your children’s education? The list is endless but important. Your end goal will affect your investment timeframe and approach. 
  2. Decide on risk vs reward. All investments carry an element of risk, although some are less risky than others. Your own risk tolerance will impact your decisions. If you have a high risk appetite you can be more aggressive and if you’re more risk averse, you will be better suited to safer investments. 
  3. Choose your first investments. There are many ways you can make your first investment but the easiest is starting with a low-cost index fund or exchange traded fund. It’s also key to remember you shouldn’t invest your whole £1,000 in one thing and spreading your money around is a good way to play it safe. 
  4. Find a broker. To make investments you will need to register with an online broker. It’s best to choose one with low fees so that your profits aren’t eaten into. An easy to use platform and range of markets are other factors to consider when looking for a broker. Lower on this page we’ve listed a few of the top ones around. 
  5. Create an account and deposit money. Once you have found a broker, you’ll then need to register an account with them. This is an easy process but remember to have a form of ID with you when creating and verifying your account. The next step is to deposit money so you can start investing.
  6. Make your first investment. Now that you’re all set up with your broker it’s time to buy your first investment. If you already know what you want to buy you can simply search for its ticker symbol and then decide how you want to buy it. You can either buy at the current price or set an order to buy at a more favorable price.
  7. Keep investing over time. Some investors use a strategy called pound-cost averaging (PCA). This is a good way to invest, especially if you have little experience. PCA is when you drip feed money into your investment at regular intervals. A benefit of this is you can balance out variance in market prices.  

Best ways to invest £1,000

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There are lots of ways to invest your £1,000, but it is generally best to put most of it into low-risk assets or funds. A long term approach to investing is also one of the better ways to help your investments grow. Below we’ve explained a few options that you could use to invest your money. 

  • Robo-investors. Digital platforms such as Nutmeg or Moneybox give investors a way to invest, without having to make decisions themselves. After filling in a survey about your goals and financial situation, an algorithm will make automated investments. Robo-investors are a cost effective and simple way to invest. 
  • ETFs. Exchange traded funds are designed to track the performance of a particular index or industry. Investing in an ETF is similar to robo-advisors, in that a passive approach can be taken. It’s best to buy shares in an ETF that is as broad as possible like an S&P 500 run by a major firm such as Vanguard. 
  • Mutual funds. These types of funds are similar to ETFs, although they are actively managed by a professional manager who chooses what the fund buys or sells. Mutual funds can be targeted to a specific industry or cover a broad range of sectors and similar to above, offer an easy and passive way to invest.   
  • ISAs. In the UK, you can invest up to £20,000 per year tax free using an ISA. You are able to buy ETFs and mutual funds through your ISA meaning you’ll pay no tax on any profits. If you’re saving for retirement you can use pension funds to get similar tax breaks.
  • Stocks. You can also buy stocks directly in companies through your online broker. Picking your own stocks can be risky, unless you have some experience. For newer investors it’s best to put most of your money in a few blue chip companies like Apple, Google, and Microsoft. With the rest, you could invest in riskier companies.  

Other ways to invest

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Below we have listed a few other options you can use to invest, although these are better suited to someone with more experience. If you’re new to investing, it’s best to stick to safer investments and move to riskier strategies as your knowledge grows. 

  • Cryptocurrency. The recent rise of cryptocurrencies has seen a surge of people speculating on the price of things like Bitcoin. While there is potential for quick and big rewards, the risks associated with investing in the crypto market are significantly high and best left alone until your experience grows. 
  • Commodities. Putting some of your money in commodities can be a good idea and investing in this sector can often offer protection against things like inflation. It’s generally not possible to physically hold many commodities but other options are available. There are specific gold or oil ETFs for example.
  • Bonds. Investing in bonds is a good way to balance out risk over the long term. A bond is a loan to a government or company and in return, investors are repaid by way of a fixed rate of interest. Most bonds have a minimum investment requirement and in the UK it’s £100 for government bonds (GILTS). 

Compare the best places to invest £1,000

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To start investing you’ll need to first register with an online broker. Below our experts have selected some of the top ones around. Offering low fees and easy to use platforms, the brokers below are a great place to start. Simply click through to the links to get started in a few minutes. 

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Cryptocurrency is offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. Invezz.com is not an affiliate and may be compensated if you access certain products or services offered by the MSB.

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Cryptocurrency execution and custody services are provided by Apex Crypto LLC (NMLS ID 1828849) through a software licensing agreement between Apex Crypto LLC and Public Crypto LLC. Crypto trading on Public platforms is served by Public Crypto LLC and offered through APEX Crypto. Please ensure that you fully understand the risks involved before trading.

What to consider before you invest

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Before you start investing there are a number of factors to consider that will impact how you invest. It goes without saying that you should only invest what you can afford to lose and a long term outlook is much safer than seeking quick gains. You’ll also need to take into consideration other financial obligations you may have. 

Below we’ve explained a few things to consider before investing. 

Financial state

Completing a financial health check prior to investing is the first thing you should think about. It’s a good idea to pay off any loans or outstanding debts you may have before making any investments. It’s also worth noting that just because you have £1000, doesn’t mean you have to invest it all at once. If you invest a small amount each month you can build wealth over time. 

Risk tolerance

Every investor will have a different tolerance to risk and it’s something you should be aware of before investing. Risk is usually correlated with reward and higher risk investments can offer substantial rewards (if you get it right). For a risk-averse investor, index funds and ETFs may work best. For an investor with higher risk tolerance, cheap stocks or crypto could be good. 

Timeframe

Time is an important factor when investing and will be linked to your goals. If you are a young investor saving for retirement, you’ll have time on your side and a lot of options. Building wealth over decades is much easier than trying to generate fast returns. The stock market has proven to outperform most other categories over a 10 – 20 year timeframe. 

Values

Every investor will have different values and these days it’s possible to invest in a variety of ways which match what is important to you. A common theme in recent years is ESG investing, in which investors seek to put their money in companies based on socially conscious factors. Islamic investing is also an option that many investors choose to use.  

Your expectations

You’ll likely have set goals before starting your investing journey and it’s key to be realistic in what they are. While its not impossible to turn your £1000 into a large sum very quickly, fast gains are hard to come by. Setting realistic and achievable expectations will make you less prone to mistakes, like over exposing your portfolio to a risky stock. Slow and steady long term growth is the safest way to make money while investing. 

Asset allocation

A common rule many investors use is known as ‘the 100 minus age’ rule. It simply means you should minus your age from 100 and whatever the number you are left with is how much you should invest in stock and the remainder into bonds. This is one of the safest ways to build a balanced portfolio while allocating assets for long term growth. 

A quick recap of what we’ve learned

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Investing with £1,000 is a good starting point and that’s certainly the case if you are young and have time on your side. Although, it’s not simply a case of buying a few shares and watching the money roll in. Building a balanced portfolio is crucial to successful investing as is diversification. 

Picking shares, funds, or ETFs that cover a broad range of sectors and industries is a good way to diversify your portfolio. It’s even easier to pick a fund or ETF that has a collection of different stocks in it.  Long term growth is the safest way to generate wealth from investing and having a long outlook for your investments is key. 

Fast money can be made, especially from riskier markets such as crypto, but the risks are equally as high. Regardless of how you decide to invest your £1,000, it is a good idea to keep up to date with the latest news and market analysis. You can also click any of the links below to be taken to our learn hub where we have free investing and trading courses. 

Investing and trading courses

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Prash Raval
Financial Writer
Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.