How to invest with little money

An investment is a monetary asset that is purchased with the idea that it will provide income in the future or will later be sold at a higher price. Putting it simply, investing is a way to increase the amount of money you have by putting it into financial products that could include:

  • Money Market Accounts
  • Stocks
  • Bonds
  • Mutual Funds
  • Precious Metals
  • Property

It’s important to understand that there is a risk attached to investing, as you do not have the security of guaranteed returns, and you may get back less than you put in.

How much do I need to invest?

You do not need a lot of money to be able to invest in Stocks and Shares. You can get started from as little as £10 a month in some cases, such as with a Junior ISA. You can also add lump sums when it suits you.

The earlier you start the better, as the longer you invest the more time there is to build up your savings pot, and to ride out any short-term market volatility.

There are different types of accounts available of varying flexibility, i.e. initial deposit required/not required, monthly saving required/not required. You can decide how you want to invest, and this should be a factor you consider when choosing the right savings or investment plan for you.

How can I invest my money?

If you are new to investing and don’t have a large amount to invest, an ISA could be a good place to start. You can use them to start saving cash or investing in stocks and shares with a relatively small amount.

An ISA is an Individual Savings Account. In the UK, every adult has an annual ISA allowance available to them with an overall limit that is set by the government. You could spread your annual ISA allowance across other types of ISA such as Cash, Lifetime and Help to Buy ISAs.

With an ISA, you pay no Income Tax on the interest or dividends you receive from an ISA and any profits from investments are free of Capital Gains Tax.

There are several different types of ISA’s available, including:

  • Cash ISA –A cash ISA can be best to meet short term savings needs as money can be easily withdrawn. There is no risk with a cash ISA as money is only saved into cash, with no investments. However, there is less potential, so you are not likely to get much interest.
  • Stocks and Shares ISA – A stocks and shares ISA invests your money in equities including stocks and shares, Government Gilts and Bonds and property, as well as cash. Over the medium to long term, this can result in your money growing more than if it was just invested in cash. There is an increased risk as the value of shares can go down as well as up, meaning that a stocks and shares ISA is more suitable for meeting medium to long-term savings goals.
  • Help to buy ISA – this is a type of cash ISA that is designed for first -time buyers aged over 16 who wish to save a deposit for their home. The ISA can be opened with a lump sum of £1,000 and you can then pay in £200 a month, up to £12,000 over the lifetime of the plan. When you purchase your first home, the government will then add on a 25% bonus. You can use it to buy a home worth up to £250,000 (£450,000) in London. Help to buy ISA’s will only be available until 30th November 2019.
  • Lifetime ISA – A lifetime ISA is designed for longer-term savings. You can open this type of ISA if you are between aged 18-40 and use the funds to buy a property or for your retirement. You can pay a maximum of £4,000 per year into this ISA and you will receive a monthly government bonus of up to £1,000 per tax year. You can continue paying into a Lifetime ISA until you are aged 50.
  • Junior ISA – A junior ISA can be either cash or stocks and shares. It is for under 18s only and must be opened by a parent or guardian, but once your child reaches 16, they can manage their account.

Other Investment options

There are various long-term investment options to choose from. As well as ISA’s, you could consider investing in the following:

Bank or building society savings account – some interest from regular savings accounts can be paid tax free due to the introduction of the personal savings allowance in 2016.

National Savings and Investments (NS and I) – a government agency that offers savings and investment products to the public. With this type of investment product, you can be sure that you’ll get all your money back, except where a penalty has been imposed for early encashment.

If you don’t have a great deal of money to invest, an ISA can be a great place to start. Stocks and Shares ISA’s and Junior Stocks and Shares ISA’s are a great way to grow your family’s money and invest in your future. Please call 0333 363 7276 to speak to a member of our friendly team.