5 Ways To Start Investing With Just £500

Five ways you can start investing with just £500.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It’s a common misconception that you have to be well-off to be an investor but is just not true. No matter how much up you’ve saved up, even if it’s as little as £500, there are many ways you can kick-start your investing career.

1.The first step any investor just starting out should take is to accumulate knowledge. Spend time reading and understanding the best way to invest based on your own unique circumstances. Take a portion of your £500 starting capital and use it to buy books on investing and take time to read as much free material online as possible. Courses on accounting and investment management would also be a great investment. At this early stage, it’s all about building a knowledge base to ensure you make sensible investment decisions with a long-term outlook. 

2. Before you dive into the stock market, you should always have some cash savings. Investing requires a long-term outlook, and you need to be prepared to lock you cash away for a number of years. Without a cash cushion, you could be forced to sell your investments at the worst possible time, which could hurt long-term returns and even cost you money. If you shop around, you can find some cash savings accounts that offer interest rates of 5% per annum if you deposit a certain amount every month and promise not to withdraw the cash for 12 months. This could be a great way to invest your cash while you research other ways of investing. 

3. If you’re ready to start investing in the market, a tracker fund is probably the best way to go. A low-cost FTSE 100 or FTSE 250 tracker is a great beginner’s investment. However, it’s important that you hunt for the best deal to minimise broker fees. Most brokers will charge an account management fee alongside trading commissions for accounts with a balance under a certain amount. These fees will eat away at returns over time. But there are ways around this. For example, TD Direct Investments offers a regular investment ISA, which doesn’t charge a management fee if you commit to investing a minimum of £25 every month, trading commissions are also reduced to £1.50 per monthly trade. If you don’t invest on a regular basis it’s £12.50 to trade, and account management fees are £30 every six months. 

4. The more entrepreneurial investors could use the £500 to start a business. Of course, you’re not going to start the next Coca-Cola or Apple overnight but it is possible to generate impressive returns by using very simple business models. Buying bottled water in bulk for £1 a bottle and then selling for £1.50 a bottle on a warm day would net you a 50% return for every £100 invested.

5. Rule number five is probably the most important. If you only have £500 to start investing, be sensible and remember Warren Buffett’s rule one of investing, “don’t lose money.” There are many get-rich schemes out there, but novice investors should avoid all of them. It may be tempting to use sophisticated financial products such as CFDs, spread betting and FX trading to help accelerate your returns, but more than three-quarters of the investors that try these products end up losing money. It’s better just to stay away entirely. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »