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Three smart things you could do with £1,000 right now

When you have a little bit of money to spare, it can be tempting to go and spend it immediately. However, often, that’s not the best financial move in the long run. The chances are, there are much better uses for that cash, and if you’re clever about how you deploy your money now, you could actually set yourself up financially for the future. With that in mind, here’s a look at three smart things you could do with £1,000 today.

Buy an investment fund

If you’re just getting started in the world of investing, mutual funds can be a great way to invest. The way funds work is that your money is pooled together with the money of thousands of other investors and it’s then managed by a professional fund manager, which takes the hassle out of investing.

These days, it’s easier than ever to invest in a fund. If you’re a beginner, a good place to start is Hargreaves Lansdown and its Wealth 50 list, which lists 50 of the investment provider’s favourite funds. All 50 have solid performance track records and are relatively cost-efficient.

Two funds in the Wealth 50 that I like in particular are the Lindsell Train UK Equity fund, which invests in a selection of high-quality UK stocks, and the Lindsell Train Global Equity fund, which invests in a selection of international stocks. Over the last five years, these have generated amazing returns of 64% and 138% for investors respectively, although past performance is no guarantee of future performance.

Buy an investment trust

Investment trusts are another good option for those looking to build up their wealth. These are similar to mutual funds in that your money is pooled together with the money of other investors and managed by a fund manager. However, the key difference between the two products is that investment trusts trade on the stock market just like regular stocks. They can make excellent core holdings within a portfolio.

There are a number of trusts that trade on the London Stock Exchange. Some invest in UK stocks, while others have a more specialised focus. For those looking for a basic ‘vanilla’ option, these two could be worth considering.

Open a Lifetime ISA

Finally, if you’re aged between 18 and 39, it could be worth putting your £1,000 into a Lifetime ISA. Why? Because the government will pay you a 25% bonus for every pound you invest up to £4,000, meaning that your £1,000 could grow to £1,250 almost instantly. From there, you could invest in a fund, an investment trust, or even directly in stocks.

Of course, there is a catch here, and that is that any money deposited in a Lifetime ISA must be kept in the account until you turn 60 or buy your first property to avoid harsh withdrawal penalties. And you may also get back less than you invested. A little inflexible, sure, but definitely worth considering if you’re serious about boosting your wealth.

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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.