How I’d invest my first £1,000 today

Investing £1,000 for the first time can be a daunting process because there are so many investments to choose from. Here’s how Ed Sheldon would invest £1k.

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.

Investing £1,000 for the first time can be a daunting process. Not only does one have to choose which assets to invest in (stocks, funds, crypto) but one also has to work out what kind of account to invest in.

Here, I’m going to explain where I’d put my money if I was investing my first £1,000 today (with the benefit of over 20 years’ investing experience). This is how I’d invest my money for long-term growth.

How I’d invest £1,000

The first thing I’d do if I was investing £1,000 today is open a Stocks and Shares ISA. This is not an investment itself. Instead, it’s a tax-efficient investment vehicle.

Investing within a Stocks and Shares ISA has several advantages. Firstly, it’s usually possible to access a wide range of investments. Secondly, all investment gains and income are tax-free. Third, money can be accessed at any time.

Overall, Stocks and Shares ISAs are very attractive investment accounts. For those in the UK like myself, they’re a bit of a ‘no brainer’, in my view.

Best investments for £1,000

The next thing I’d do is choose some investments for my £1,000.

Now, for a £1,000 lump sum, I’d go with an investment fund. The advantage of investing in a fund is that one’s money is spread out over many stocks. This reduces risk massively. One also doesn’t need to worry about picking individual stocks.

I’d select a ‘global equity’ fund. The reason I’d do this is that many of the world’s most dominant companies (Apple, Amazon, etc.) are listed overseas.

There are plenty of global funds I like. However, if I had to pick one for my first £1,000, I’d go with Fundsmith Equity, which is one of the most popular funds in the UK. It was launched in late 2010, invests in high-quality businesses for the long term and has a great track record. Since launch, it has returned about 19% per year (past performance is not an indicator of future returns though).

There are fees associated with this kind of fund. However, I think the fees are worth it considering the diversification benefits and the performance track record.

I wouldn’t invest the whole £1,000 at once, however. Instead, I’d drip feed the money into the fund over a few months. That way, if the stock market was to fall 10% or 20% in the near term, I’d be able to take advantage of the lower prices.

My approach to investing £1k

After investing the £1,000, I’d leave the money alone for the long term. I’m talking five years or more. Investing is a long-term game. In the short term, the stock market can be volatile. However, over the long run, good stocks tend to rise.

Finally, at a later stage (once my account was bigger), I’d consider adding some more investments to my ISA. Once I’d built up a solid ‘core’ portfolio with funds, I’d consider adding some individual stocks to the portfolio in an effort to boost my returns.

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 considered so you should consider taking independent financial advice.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares of Amazon and Apple and has a position in Fundsmith. The Motley Fool UK owns shares of and has recommended Amazon and Apple. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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