Best way to invest £1,000: 6 ways to invest it

Have £1,000 to spare? Find out 6 ways to invest it.

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So you’ve got £1,000 you want to invest? Amazing news! We’ve pulled together some things that you can do with that £1,000 to put it to good use and to stop yourself from blowing it all on a trip abroad or takeaways – not that these aren’t great ideas! Not all of these are investing in the generic way, but it’s worth looking at all of your options and to make sure you know the risks that come with investing.

Before you begin, a few considerations

There are a couple of questions you should ask yourself before you decide what to do.

Can I afford to lose it?

The first question you need to ask yourself when investing £1,000 is whether you can afford to lose it. That may seem a silly question – who can really afford to lose £1,000? And even if they can, surely everyone would rather keep it? However, judging the level of pain you feel can be a useful guide to how much risk you can take.

If you would feel some mild irritation, but ultimately shrug your shoulders, perhaps you can take a punt on a technology investment that might make you multiple times your money but comes with far greater risk of losing money. If, on the other hand, losing money is the stuff of your nightmares, then you are going to need something that’s a little safer but offers less reward, like a savings account.

That said, you will have to be careful which savings account you pick given that interest rates are below 1% and the growth of your money will probably lag inflation, meaning that while the amount of money you have increases, you lose money in real terms over time. There are different risks with every decision.

How long can I tie it up for?

Another important consideration is how long you can tie up the money for. If you are likely to need it for a house deposit in a few years, you certainly shouldn’t be dicing with very risky investments like single stocks, cryptocurrencies or niche commodities. That’s not much better than betting on the 3:20 at Chepstow. Arguably, you shouldn’t be looking at stock markets either, which usually need a five year time horizon in order to ride out the volatile patches. If you have a longer time horizon you can afford to take a little more risk in the hope of achieving higher returns.

How to invest £1,000

Now we’ve got that covered, here are the best ways to invest £1,000.

Pay off expensive debt

If you have any expensive debt and also happen to have money to spare, pay it off. The chances are that your bank is making a lot of money out of you. Paying off expensive debt should be your first priority if you’ve got £1,000 in your pocket. There is pretty much nothing else you could do with your money that would give you better returns, as you could be paying more than 50% in interest.

It is also worth checking if you can restructure any remaining debt over and above £1,000 to a lower rate. Loan rates today are typically between 3% and 6% and may be a better option than an overdraft.

Put it in a savings account

If you really can’t bear to lose your nest-egg. It’s going to have to be a savings account. You’ll be protected by the Financial Services Compensation Scheme up to £85,000 if the bank goes bust so your capital is safe. The problem with a savings account is the pathetically low rates of interest on offer so you really have to scout around for the best deals.

It’s possible to get up to 2% on some current accounts for balances up to £1,500. The best easy access savings account is currently 1.1% and you can get a little higher if you’re willing to tie your money up for a year or more. It’s not exciting, but should keep your money intact.

Invest in a collective fund

If you’re dipping a toe into stock market investment for the first time, the best option is to go for a collective fund that gives you broad global exposure to a collection of the world’s largest companies. This may be through an ETF on the MSCI World or through a global fund from a good fund group. So-called “multi-asset” funds can also be an option. These give you a blend of bonds and equities, based on your risk profile (from cautious to risk-taking).

Invest in the future

It’s a rookie error to find the latest “hot” technology company and put all your cash in there. You need to ask yourself whether you’ve really got the inside line, or whether the potential growth is already in the price of the shares. If you’ve really got an appetite for risk, try a sector ETF in one of the key growth areas: artificial intelligence, cloud computing, the energy transition or Fintech. They’re risky, but at least they’re diversified across a range of stocks. You may win big, but don’t kid yourself that it’s a safe bet, no matter how compelling the trend.

Emerging markets might be another option for those who are happy to see their capital bounce around. In the past 20 years, China has grown to be as important on the global stage as the US, and investors could capture these changing geopolitical fault lines with an investment in emerging markets.

Invest in yourself

The pandemic may be a once-in-a-lifetime event, but the jobs market can always be precarious. Your £1,000 could be used to establish a “side hustle” – whether you’re a keen butcher, baker or candlestick maker. Or, you could invest in a course that could further your career. This may pay off many times in the future. Even if there is no immediate reward, you may be giving yourself a useful fall-back position.

Put it in a pension or ISA

If you put your £1,000 in a pension and you’re a 20% taxpayer, you’ll get £200 added to your investment, £400 if you’re a high rate tax payer (though you’ll need to claim it through a tax return). £1,000 invested when you are 25 could be worth £5,700 when you are 60. That same £1,000 invested when you are 45 will only be worth £2,100 so it’s worth starting pension provision early.

The other option is an individual savings account (ISA). You won’t get any upfront tax relief, but any income (such as dividends) will be received tax free and you won’t pay any capital gains tax either. It’s good practice to save in a tax-efficient scheme if possible and so opening a pension or ISA early on can get you into good habits.

In summary

Investing £1,000 probably isn’t going to make you rich, but don’t under estimate how much difference it could make to your financial well-being. Spent wisely, it can set you on a path to a better financial future.

Compare investment services

Table: sorted by promoted deals first
Data indicated here is updated regularly
Name Product Price per trade Frequent trader rate Platform fees Brand description
Fineco
£2.95
£2.95
Zero platform fee
Your first 100 trades are free with Fineco, T&Cs apply.
Fineco Bank is good for share traders and investors looking for a complete platform and wide offer. Capital at risk.
eToro Free Stocks
0% commission, no markup, no ticket fee, no management fee
N/A
Withdrawal fee & GDP to USD deposit conversion
Capital at risk. 0% commission but other fees may apply.
IG
0% commission on US shares, and £3 on UK shares
From £5
£0 - £24 per quarter
IG is good for experienced traders, and offers learning resources for beginners, all with wide access to shares, ETFs and funds. Capital at risk.
Hargreaves Lansdown Fund and Share Account
£11.95
£5.95
No fees
Hargreaves Lansdown is the UK's number one platform for private investors, with the depth of features you'd expect from an established platform. Capital at risk.
Degiro Share Dealing
£1.75 + 0.022% (max £5.00)
£1.75 + 0.022% (max £5.00)
Portfolio transfer fees (in & out)
Degiro is widely seen as one of the best low-cost share brokers, for people who are looking to trade regularly. Capital at risk.
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Compare up to 4 providers

Data indicated here is updated regularly
Name Product Minimum deposit Maximum annual fee Price per trade Brand description
Interactive Investor stocks and shares ISA
Any lump sum or £25 a month
£119.88
£7.99
Interactive Investor offers everything most investors need. Its flat fees makes it pricey for small portfolios, but cheap for big ones. Capital at risk.
Moneyfarm stocks and shares ISA
£1500
0.75%
£0
Moneyfarm helps you meet your investment goals with fully-managed portfolios designed around you. Capital at risk.
Hargreaves Lansdown stocks and shares ISA
£100
0.45%
£11.95
Hargreaves Lansdown is the UK's biggest wealth manager. It's got everything you'll need, from beginners to experienced investors. Capital at risk.
Nutmeg stocks and shares ISA
£100
0.75%
£0
Nutmeg offers three types of portfolios. Choose the one that goes with your investment style. Capital at risk.
Saxo Markets stocks and shares ISA
No minimum deposit requirement
0.12%
£8.00
Saxo Markets offers a wide access to a range of stocks, ETFs and funds. Capital at risk.
AJ Bell stocks and shares ISA
£500
0.25%
£9.95
AJ Bell is a good all-rounder for people who to choose between shares, funds, ISAs and pensions. Capital at risk.
Fidelity stocks and shares ISA
£1000 or a regular savings plan from £50
0.35%
£10.00
Fidelity is another good all-rounder, offering a good package at a decent price. Not suited for trading shares. Capital at risk.
Legal & General stocks and shares ISA
Legal & General stocks and shares ISA
£100 or £20 a month
0.61%
N/A
Legal & General is a big financial services company which offers insurance, lifetime mortgage, pensions and stocks and shares ISAs. Capital at risk.
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Data indicated here is updated regularly
Name Product Minimum investment Choose from Annual fee Brand description
Interactive Investor Pension
Any lump sum or £25 a month
Over 3,000 funds
£10/month
interactive investor is a flat-fee platform, which makes it cost effective for larger portfolios. Capital at risk.
Moneyfarm Pension
£1,500 (initial investment)
7 funds
0.35%-0.75%
Moneyfarm has pensions that are matched against your risk appetite, goals and planned retirement date. Capital at risk.
AJ Bell Pension
£1,000
Over 2,000 funds
0.05-0.25%
AJ Bell has two different pension options, a self managed pension and one that is managed for you. Capital at risk.
PensionBee Pension
No minimum
7 funds
0.5% - 0.95%
Pension Bee is a newbie in the pension market. It helps consolidate your pension plans into one place. Capital at risk.
Hargreaves Lansdown Pension
£100 or £25 a month
2,500 funds
0-0.45%
Hargreaves Lansdown is the UK's biggest wealth manager. It's got three different retirement options. Capital at risk.
Saxo Markets Pension
Saxo Markets Pension
£10
Over 11,000 funds
No annual fee
Saxo Markets gives flexibility and control over your investment strategy. Capital at risk.
Penfold
Penfold
No minimum
4 portfolios
0.75-0.88%
Moneybox Pension
£1
3 funds
0.15% - 0.45% charged monthly
Manage your money with an easy-to-use Moneybox app. Capital at risk.
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

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