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What’s the best way to invest small amounts of money?

Think you need a huge fortune to start investing? Think again! You can become an investor with very little money – here’s how.
What’s the best way to invest small amounts of money?
Reading time: 5 mins

The UK isn’t a nation of investors. According to research we conducted in 2023, more than half (52%) of people hadn't even considered investing in the past year.

There are many reasons why there's a reluctance to invest, but a big one is the belief that you need a huge bundle of money to get started. In fact, 43% of those we surveyed said they hadn't invested due to a lack of money, and we found that the average amount people thought they needed was £41,354.

However, thanks to digital investment management platforms like Wealthify, it’s now possible to start building your financial future by investing small sums. Here’s how it works. 

Try robo-investing

Before the Internet, not everybody had access to wealth management. Anyone could buy a stock, but they’d need to call a broker to do so, and the minimum investment required was often high. However, things have changed since then, and investing can now be done online.

Since the emergence and proliferation of digital investment services, you no longer need thousands in your bank account to invest, and you don't need to do the hard work of choosing what to invest in. With Wealthify, you can put in as much or as little as you like, starting at just £50 for our Pension and £1 for our other Investment Plans (including our Stocks and Shares ISA).

We'll build you a portfolio of investments and make all the investing decisions. And although you will have to pay fees, like with other investing platforms and investments, we aim to keep these low.

Drip feed your investments

Building a decent nest egg when you can only afford to invest small sums isn’t mission impossible. In fact, you could do this by investing little and often.

This is a technique called 'drip-feeding' and means topping up your investment will small amounts of money regularly – like £20 every month, for example. At Wealthify, you can easily set up a Direct Debit into your Investment Plan, and pay in just £1 at a time with our Stocks and Shares ISA, Junior ISA, and General Investment Account.

By regularly investing a set amount, you take emotion out of the equation by not focussing on where the markets are heading next. The value of investments regularly go up and down with the markets, and you can't predict when this will happen. But when financial markets are struggling, drip feeding could give you the opportunity to buy cheap investments that might potentially go up in value if the markets bounce back. 

Invest for a number of years

In addition to drip feeding, you might want to consider if you can remain invested over the long-term – and by that, we mean at least five years. After all, investing isn’t just about how much you’re putting in, it’s also about how long you’re willing to invest for.

The longer you stay on the ship, the more likely your voyage could end in positive waters. And this is because stock markets go up and down all the time, and the longer you hold onto your investments, the more time you'll have to potentially ride out the dips, and for them to go back up in value. As an example, Bloomberg data shows that those who had invested in the FTSE 100 index for any 10-year period from 1986 to 2022 had an 88% chance of getting a positive return.

If you react to every market downturn and begin to panic sell, you'll just be making your losses real, and you might also miss out on some of the good days. 

Try to mitigate risk

Even with a a small amount of money invested, you might want to consider how to mitigate your risk. And although there is always the chance that you could lose money when you invest, there are things you could do.

One way to do this is by spreading your money across lots of investments and regions – for example, by investing in a range of different assets (like stocks, bonds, commodities and property), and indexes from around the world (like the UK's FTSE 100 and S&P 500 in the US).

But can you really do it if you only invest a small amount? The answer is yes! With just £1 (and £50 for Pensions), our experts at Wealthify can build you a Plan that contains thousands of investments, including shares and bonds from many different regions around the world, such as Japan, Europe, the UK, and the US.

Use a Stocks & Shares ISA

Regardless of how much money you can afford to invest, why not consider using a Stocks and Shares ISA (or Investment ISA, as they're also known)?

Once invested in an ISA (Individual Savings Account), your money is protected by an invisible wrapper designed to stop the tax office from taking a cut. Basically, this means that unlike when you typically invest, you won't have to pay tax on any profits you make, and you'll get to keep more of your returns!

And with our Stocks & Shares ISA, all you need to do is tell us how much you want to invest and how often, and what your appetite for risk is. We'll then build your Investment Plan and manage it for you.

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

Wealthify does not provide financial advice. Seek financial advice if you are unsure about investing.

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