Simple Ways To Invest Money

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There is a popular myth that investing is for those with knowledge and money.

But you don't have to be rich because there are investment platforms that let you invest with just £1.

The trick is to get in the habit of saving little and often, while taking advantage of tax-free wrappers like ISAs.

This article will cover:

Six ways to invest with little money
What is the best investment for a beginner?
What's the best way to invest money for the short term?
Should I use a savings account instead?

Learn more: Beginner's guide to investing

Lightbulb next to piles of coins — You don't need to be rich to start investing. You can set up some accounts with just £1

Six ways to invest with little money

The first step is to sign up to a low cost investment platform. We have outlined our favourites here.

Most platforms will allow you to open a stocks and shares ISA to protect your profits from the taxman. Check out our top stocks and shares ISAs.

Once you have done that, you need an investment strategy. Here are some tips to invest:

1. Drip-feed your cash into investments

You don't need to have a lump sum to start investing. Actually investing small amounts of money regularly is better than investing a large lump sum in one go.

By investing a small amount of money each month you are less vulnerable to market fluctuations. You also inevitably end up buying more shares when they are cheap and fewer when they are expensive (which is known as pound-cost averaging).

Find out more: How to invest during a recession

2. Buy an index tracker

Exchange-traded funds or index funds track the performance of a stock market or asset class. We explain more on ETFs in our investment guide for beginners.

ETFs tend to be much cheaper than actively managed funds (where a stock picker selects investments on your behalf). They are a simple and cost-effective way to build a portfolio with little money.

You can invest in an exchange-traded fund via an investment platform such as AJ Bell Youinvest, Hargreaves Lansdown* or Interactive Investor.

Find out: How to choose investment funds

3. Use a robo-adviser

If you invest via a robo-adviser, you let an algorithm do the hard work for you in deciding where your money should be invested.

You can invest through an online fund platform such as Nutmeg or Evestor, which will create a portfolio for you.

The minimum investment with Evestor is just £1. For Nutmeg customers, the minimum investment is £100 or £500 depending on which types of investment account you choose.

It's called a robo-adviser because it's not a human fund manager or financial adviser looking after your money, making it a cheaper option.

Learn more: Best robo-advisers

4. Mitigate your risk

Diversify your assets; in other words, don't put all your eggs in one basket.

This means spreading your cash across different asset classes, market sectors and countries. This can help level out any fluctuations in prices.

Find out more: Guide to investment trends

Top rated self-invested stocks & shares ISAs

Barclays

Investment ISA

Close Brothers Asset Management

Close Stocks & Shares ISA

InvestEngine

ISA

5. Invest for the long-term

Investing small amounts of money every month might seem insignificant, but over many decades, you could have built a large pot.

If you intend to keep your money invested for decades, you can afford to take more risk than someone who might need access to their cash in the next few years.

This is because the longer your investment horizon, the more time you have to ride out the bad times as prices will recover.

Investing in a pension is a great way to do this because they attract tax relief from the government (and free cash from employers for those in workplace pension schemes).

If you're looking for a ready-made personal, we have given Nutmeg five stars. We outline the top pension providers here.

6. Open a high-yield savings account

While lots of savings accounts are currently paying next to next to nothing, you could get a better deal if you don't mind tying your money up for months or even years.

The best rates tend to come from regular saver accounts but they often have conditions attached, such as saving up a certain amount each month.

We list the top savings accounts where fixed term bonds and regular saver accounts emerge the winners.

Barclays Wealth Global Markets Portfolios

Coutts

Coutts Invest

evestor

eVestor portfolio

What is the best investment for a beginner?

If you're just getting started, you might want to read our beginner's guide to investing here.

The best investment is one that you feel comfortable with considering your:

Timeframe
Goals
Attitude to risk
Experience

Only choose what you understand. If you know you want to invest in the stock market, but don't feel confident investing in individual shares, it may be best to let a platform choose for you.

Here we outline the best investment platforms for beginners

What's the best way to invest money for the short term?

If you are likely to need your money in less than five years, it's best to leave the money in cash rather than invest.

The stock market could fall in the short term, meaning you would lose money on your investments if you tried to take it out when the market was down.

Tie up your money in a fixed-term cash ISA of between one and five years, or put it into a high-interest account like a regular savings account.

This may give you a slightly better rate of return than you would get with a normal savings account.

But be warned, interest rates are historically low at the moment so you won't get a great return.