It’s possible to start investing with under £1,000 – here’s how I’d do it!

This writer has been around the block in the stock market. Here’s his take on how he’d start investing from scratch, with limited funds.

| More on:

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.

A young woman sitting on a couch looking at a book in a quiet library space.

Image source: Getty Images

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.

One myth about the stock market is that it requires a lot of money to start investing. Not only is that untrue, but I actually see some benefits to beginning a stock market journey sooner and with a smaller amount than later, with more funds.

We all hope to avoid beginner’s mistakes, but at least when they happen with only a small amount at stake they tend to be less financially painful.

If I had under £1,000 and wanted to start investing in the stock market, here is how I would go about it.

Should you invest £1,000 in AstraZeneca right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if AstraZeneca made the list?

See the 6 stocks

Question 1: why?

I would start by asking myself why I want to invest. That may sound obvious. But in fact there are different reasons – and they can have an impact on the approach taken. Some people invest to try and grow their portfolio value. Others want to set up passive income streams, thanks to owning shares that pay dividends.

Whatever the reason, I think it is good to be as clear as possible the reason to invest. That will shape the investment decisions you make.

Question 2: how?

For me, the next question is how? Others though, might ask how much?

With under £1,000 I think it is possible to get going in the stock market. The question of how much is not irrelevant though, as I would need to decide what amount to put into any one share. After all, I would aim to start investing as I meant to go on, by diversifying my portfolio.

As to how, I would devise an investment strategy based on my objectives.

To begin, I would aim to keep my risks low, as inevitably I would still be learning. To figure out how to invest and try to achieve my goals, I would want to learn about the stock market in more detail. Specifically, I would dig into questions like valuation.

Question 3: what?

Valuation matters because it drives my returns as an investor (or not). To do well, I typically want to invest in great companies – but I also want to invest at the right price.

As an example, consider Legal & General (LSE: LGEN). The FTSE 100 financial services provider has a number of things going for it. For starters, the market for retirement-linked financial services is huge – and I expect it to stay that way.

Specifically, Legal & General has a number of things working in its favour when competing in that market, from its well-known brand to a large customer base.

The company has sharpened its strategy over the past decade, giving it a clearer focus on retirement. I see that as a competitive advantage when compared to more generalist rivals.

Legal & General faces challenges (as do all companies). One that concerns me is the prospect of an economic pullback leading clients to withdraw funds. That could result in a dividend cut, as we saw during the last financial crisis.

Created with Highcharts 11.4.3Legal & General Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Still, with a 9% yield, that puts it among the most rewarding of FTSE 100 dividend payers, Legal & General is potentially a passive income goldmine, in my opinion. That is why I hold the share in my Stocks and Shares ISA.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

C Ruane has positions in Legal & General Group Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

10% dividend yield! Here’s a FTSE 100 share to consider in April for passive income

This FTSE 100 stock just soared past the 10% yield mark, making it a potentially lucrative option for investors targeting…

Read more »

Young black woman using a mobile phone in a transport facility
Investing Articles

3 FTSE 100 safe haven stocks to consider as trade wars bite

I'm confident in the long-term outlook for the FTSE index of stocks. But these blue chips may protect investors from…

Read more »

Investing Articles

Here’s how Trump tariffs could hand us some top passive income bargains

As tariff terror grips the stock market, it's time for passive income investors to steel our nerves and look for…

Read more »

Investing Articles

These FTSE shares may offer some safety as Trump slaps tariffs on trading partners

FTSE shares moved lower on 3 April, after US President Donald Trump introduced hefty tariffs on its trading partners. These…

Read more »

Investing Articles

6.8% dividend yield! Consider these 2 ‘secret’ passive income stocks to target a £1,360 payday in 2025

Looking for ways to generate above-average dividend income? These lesser-bought income stocks are worth a close look.

Read more »

Elevated view over city of London skyline
Investing Articles

The M&G dividend yields over 10% — and could get higher!

Christopher Ruane explains why he's upbeat about the long-term outlook for the M&G dividend yield and would happily buy the…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

2 popular UK growth stocks I wouldn’t touch with a bargepole in today’s market

Buying growth stocks can deliver market-beating returns, but this FTSE 250 pair doesn't look like a convincing investment for our…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

10 FTSE shares falling today after President Trump’s tariffs bombshell!

Our writer explains why JD Sports Fashion from the FTSE 100 and a diverse bunch of other UK stocks are…

Read more »