How to invest £1,000: a complete guide

If you’re new to the world of investing and wondering how to invest £1,000 pounds, here’s a complete guide to help you on your journey.

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Sometimes, it can be tough to know the right route to take when it comes to saving and investing. If you’ve saved £1,000 and you’re wondering how best to invest it but don’t know where to begin, we’re here to help.

This complete guide covers everything you need to consider before putting your money to work and some practical tips for actually going ahead with your plans.

Can you invest with just £1,000?

Yes! You can actually invest with a lot less than £1,000 in most cases. Some brokerage accounts will let you get started with as little as £1.

Rather than investing your £1,000 in one big chunk, you also have the option of splitting it up. For example, you could invest £100 each month over ten months.

This is called pound-cost averaging and it can be a good strategy for beginners. It allows you to gradually get more comfortable with investing by starting with smaller amounts. If you need some more help with the basics, here’s a simple guide on how to buy shares.

What should you consider before you invest?

Investing is an exciting step towards financial freedom. But before you invest your hard-earned money, it’s important that you consider a few key questions:

  • Are the rest of your finances looking healthy?
  • Do you have an emergency fund or some rainy day money tucked away?
  • Should you prioritise paying off high interest debt from things like credit cards?
  • Are you comfortable with the idea of potentially locking your money away for a number of years?

If, after reading this checklist, you think you’re ready to invest and put your £1,000 to work, read on for some exciting ways to get started.

What are the best ways to invest £1,000?

With £1,000, there are plenty of roads you can take as an investor. If you’re completely new to the space, then you should start with learning the basics of investing in stocks.

Ideally, you should create an investing strategy based on what you want to achieve with your money. Different methods will suit different people, but here are five ways that you can start investing your £1,000.

1. Global index fund

This is probably the easiest option. Get yourself set up with a share dealing account and then find a global equity index fund.

These funds cover a range of stocks from different countries, meaning you’ll automatically get a well-diversified portfolio with just a single investment. Often, these funds also have low fees, which is great for building wealth. But passive investing like this does have its downsides too.

2. Multi-asset managed portfolio

These days, it’s easy to set yourself up with a robo-advisor that will invest your £1,000 and manage it for a low cost.

Often, you just need to select your level of risk and the robo-advisor will give you a ready-made portfolio containing a number of different assets. Some regular investing platforms like Interactive Investor offer this service.

3. Dividend heroes

Investing £1,000 in a company or fund that pays you a dividend is a good way to start creating some passive income.

This method requires some basic research on your part. Dividend payouts aren’t guaranteed, but they can be fairly reliable, especially if you pick something like a dividend hero or a dividend aristocrat. You can then decide whether to keep your payments or reinvest them to help grow your portfolio.

4. Investment trusts

These can be a brilliant way to get a managed portfolio at a low cost. Not all investment trusts are equal, and it’s important to research the fund you plan to invest in.

You can either pick one investment trust for your full £1,000 or pick a few to spread out your investments. Usually, individual trusts have ongoing fees that you need to be aware of, but they can still be an affordable way to invest.

5. Both sides of the pond

This involves investing in the big US and UK companies. To do this, you can split your £1,000 in half and invest:

  • £500 in an S&P 500 index fund
  • £500 in a FTSE 250 index fund

This gives you exposure to some of the top companies in both the US and the UK. By doing this, you get quite a variety of stocks for a low fee. But the downside is that you’ll only be invested in companies from these two countries.

Are there any ideal platforms to invest £1,000?

If you’re new to investing, it’s definitely worth using a brokerage that’s designed for beginners. Some good share dealing platforms for beginners include:

Using one of these platforms can make things easier for you as the services are tailored to new investors. Whilst you’re learning and finding your feet, it’s ideal if everything is as easy as possible. Otherwise, investing your £1,000 might feel too complicated or overwhelming, which it doesn’t have to be!

Whatever platform you choose, try and use a stocks and shares ISA account if you can. Using an ISA can protect your investment gains from tax. This will make your life easier and lead to better returns in the long run.

Our list of featured stocks and shares ISA accounts can help you get started today.