How much money do you need to start investing?

It’s a myth that only rich people invest. Find out how much money you need to invest.

When you think about investing, you might imagine high-earning bankers with tailored suits and heavy watches. But as UK interest rates have plunged, ordinary consumers have increasingly turned to investing to try to get their savings to work harder. A Finder survey in May 2020 found 33% of UK adults owned shares – up from 22% in 2018. Find out how much money you need to start investing, and what to consider before you start.

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.

How much do I need to start investing?

At the UK’s most popular do-it-yourself investment website Hargreaves Lansdown, you can invest for as little as £25 per month, or with a lump sum as small as £100. That’s birthday-card-from-nan kind of money.

There are other options where you can invest even less. With the app Moneybox, for example, you can get started from just £1, and grow your investment pot by automatically rounding up purchases to the nearest pound, so you barely notice it at all.

Another mobile option is Wealthify, which lets you simply choose your risk level and again allows you to invest from just £1.

Compare other share trading platforms with our comparison table.

Beware the investment fees

  • Although some companies let you invest a very little amount, some charge a flat rate to use them. Moneybox, for example, charges £1 per month. If you only have a few pounds, this amounts to more than you would likely make from your investment. It does help to have at least a small lump sum to start off.
  • Hargreaves Lansdown charges a percentage – specifically, it takes 0.45% of the total amount you have invested with them every year. This is especially appealing for people with less to invest as it means they are getting the services offered by Hargreaves for a very cheap price.

Consider your investment options

There are two things to think about when you invest: what your actual investments are, and what kind of product or ‘wrapper’ you are keeping them inside. Different wrappers have different benefits. There are two wrappers that give you good tax advantages: ISAs and SIPPs, as well as general investment accounts, which don’t have a wrapper.

  • ISAs (individual savings accounts) : These let you avoid paying tax on any interest or capital gains you make on assets held within, and you can put up to £20,000 in the 2021/2022 tax year. However, if you aren’t investing very much, these tax benefits will make little to no difference to you, because dividends of less than £2,000 are not taxed anyway, and capital gains that are less than your allowance (which varies depending on income) escape tax as well.
  • SIPP: If you can afford to put your money away for longer, self-invested personal pension (SIPP) might be of more interest. Because it’s a type of pension, when you put money in a SIPP you will get back the income tax you will have paid on it. For a basic taxpayer, this equates to an automatic 25% boost to the amount you invest. Pretty enticing.
  • General investment account:You can also invest in a general investment account, which doesn’t offer any tax advantages but has no upper limit to the amount you can invest.

What to invest in

The second thing to consider is what to invest in. You could buy individual shares, but stockpicking is notoriously difficult even for weathered professionals. It also tends to be more expensive than buying financial products such as funds, so for someone with not much to invest you may instead decide to buy a fund, which is a bundle of shares selected by a fund manager.

Other similar products include exchange-traded funds and index funds, which hold shares to match an index (think the FTSE All Share or similar) rather than being picked by a manager. These tend to be cheaper than actively managed funds. Some funds have minimum investments, so you may find your choices limited if you have very little to invest.

How often should I be investing?

If you’re trying to build up an investment pot while staying within the bounds of a tight household budget, try to put at least £25 per month away. This is the minimum amount Hargreaves Lansdown allows, but at the same time, it will let you build up a surprisingly satisfying pot in a relatively short time. You can always scale up your contributions when you have more disposable income.

How long should I invest for?

Investing is not an instant-gratification kind of thing. From one day to the next the value of your holdings will rise and fall. You don’t want to have to sell your investments at a bad time, and the longer you remain invested the more your returns (capital growth and dividend payouts) will be able to compound.

Prepare to be invested for five years at least, and longer if you can.

Compare trading options

Table: sorted by promoted deals first
Name Product Ratings Finder rating Customer rating Min. initial deposit Price per trade Frequent trader rate Platform fee Offer Link
FREE TRADES
eToro Free Stocks
Finder score
★★★★★
User survey
★★★★★
★★★★★
Expert analysis
★★★★★
User survey
$50
£0
N/A
£0

Capital at risk

Platform details
Degiro Share Dealing
Finder score
★★★★★
★★★★★
Expert analysis
Not yet rated
£0.01
UK: £1.75 + 0.014% (max £5)
US: €0.50 + $0.004 per share
N/A
£0

Capital at risk

Platform details
interactive investor Trading Account
Finder score
★★★★★
User survey
★★★★★
★★★★★
Expert analysis
★★★★★
User survey
£0
£7.99 (with one free trade per month)
N/A
£9.99 per month

Capital at risk

Platform details
Finder Award
OFFER
Freetrade
Finder score
★★★★★
User survey
★★★★★
★★★★★
Expert analysis
★★★★★
User survey
£0
£0
N/A
£0
Claim your free share worth between £3 and £200. Capital at risk.

Capital at risk

Platform details
Hargreaves Lansdown Fund and Share Account
Finder score
★★★★★
User survey
★★★★★
★★★★★
Expert analysis
★★★★★
User survey
£1
£11.95
£5.95
£0

Capital at risk

Platform details
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Compare up to 4 providers

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.

Hargreaves Lansdown on what new investors need to look out for

Bottom line

Investing is no longer the preserve of the rich; you can start investing with as little as £1. It’s worth considering putting aside a small amount each month to invest, if it’s money you can spare. And as long as you’re aware of the risks, and aren’t investing more than you can afford, you have the chance to start growing your portfolio sooner than you may have thought.

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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