So you have managed to save up £1,000 to invest, great! But how are you going to invest it, this is what we will look at in this article. To start with, however, you need to be honest with yourself; is this money you are happy to part with for years, and what is your apatite towards risk.
Now, you are not going to get rich quick by investing £1,000, that is unless you are ridiculously fortunate, but it can be a foundation of growth long term. Below are ways in which you can start putting your money to work.
- A strong foundation
- Start a stocks portfolio
- Invest in yourself
- Start a business
- Save for retirement
A Strong Foundation
Before you start putting money into the stock market or other such assets you need to have a strong financial foundation. Having a strong foundation means having no consumer debts such as credit cards or personal loans, as well as having a fully funded emergency fund. The last thing you want to do as an investor is have to sell assets to pay off debt or fund a one off unforeseen expense.
While it may be very boring and not going to start making you loads of money, you need make sure you keep on top of your foundations. For example if you had £1,000 in credit card debt at a rate of 19% APR that will cost you £190 over a year or £15.83 per month. If you average a 8% return in the stock market with £1,000 that will net you £95 in a year. So you would actually be losing money by investing into the stock market when compared to your high interest debt.
Start a Stocks Portfolio
With your strong foundation now in place you could invest in starting a stocks portfolio. Before you do this you need to figure out two things: what brokerage to use and what type of stocks investor you want to be. A great place to start when looking at brokerages is to look at the free ones, these include eToro, Trading212 and Freetrade. These are all great if you are new to investing as they are all user friendly and have fee free trades.
If you are new to investing into the stock market it might be worth looking into Exchange Traded Funds (ETFs) such as index funds. These are funds comprised of lots of stocks from different companies which together aim to replicate the returns of an index or industry. These are highly diversified investments and therefore ideal for new investors.
However, if you are willing to put in the research and closely monitor your investments, investing into individual stocks might be for you. The requires you to keep up to date with company and general news, reading financial statements and examining fundamental and technical data. When investors do the due diligence an put in all the research they stand a good chance in making great returns with individual stocks.
Invest in Yourself
While it is not the most exciting, investing in yourself can gave amazing returns for your future. Spending £1,000 on courses and books to up skill and increase your knowledge will pay dividends for years to come. Some useful subjects that all workplaces will value include Human Resources (HR), Health & Safety and IT. I would recommend looking at Reed Courses, this is a great site where you can find thousands of accredited courses at discounted prices.
If you currently at an entry level position and you want to progress to management, you will need to educate yourself and do courses to make yourself stand out. In this scenario you could undertake a diploma in Management and Leadership and even supplement this with workplace specific learning.
Start a Business
While you can make a lot of money in the stock market, starting a business can give you the greatest returns. You can start a project as a side business and then eventually scale it up to a full time enterprise and hire employees.
Most business start as side hustles and don’t need to cost a lot of money to start up. If you have an artistic flare or are creative, you could easily monetize your hobby using sites such as Ebay or Etsy. By investing £1,000 into your hobby you could scale up by buying more materials, set up a website or do advertisement.
While starting a business can have great returns, it is by far no easy endeavor. Starting a business takes a lot of time and effort for very little immediate reward. The first year or so will be very slow and your aim should be to just break even with your revenue. Once you have managed that and gained some experience you can then start to growth and compound your gains.
Save For Retirement
As a nation we do not save nearly enough for retirement, as a result people end up relying on the state pension and other benefits to survive. This is not good enough, with retirement savings it is best to start early. If your company offers a workplace pension with a contribution match, take advantage of it.
Making additional contributions towards retirement savings has some great tax advantages. As a basic rate tax payer you will get 20% tax relief added to any of your contributions, this increases to 40% if you are a higher rate tax payer. So if you was to contribute £1,000 to your retirement savings the government will contribute an additional £200 in tax relief giving a total contribution of £1,200.
Additionally, Lifetime ISAs are a great way to save for retirement. You can contribute up to £4,000 to a Lifetime ISA and the government will contribute an additional 25% on all your deposits up to a maximum of £1,000 per year. Additionally, you can invest your money within a Lifetime ISA so not only are you getting a 25% return on your deposit, but you will also get any gains from investments.
None of the content in this article should be considered financial advice, I am not a financial advisor and you should always do your own research prior to investing. These are my opinions only.