How much money do you need to start investing?

It’s a myth that only rich people invest. Here, we look at how to start investing with little money.

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Fact checked

All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back lessthan you invest. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

When you think about investment, you probably imagine City workers with tailored suits and heavy watches. But more and more everyday people are taking responsibility for their own investments, and in today’s online world it’s easy to do so without busting your budget.

How much do I need to start investing?

It doesn’t take millions or even thousands of pounds to begin 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.

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.

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.

ISAs or Sipps?
  • 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 2018/19 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.
  • Plain investment account:You can also invest in a plain investment account, which doesn’t offer any tax advantages but has no upper limit to the amount you can invest.
  • Conclusion:If you will need the money before you retire, you should either invest in an ISA or a general investment account. If you want the tax boost and can hold off accessing the money, use a Sipp.
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.

Hargreaves Lansdown on what new investors need to look out for

Compare trading options

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 50 trades are free with Fineco, until 31/12/2020. T&Cs apply.
Fineco Bank is good for share traders and investors looking for a complete platform and wide offer. Capital at risk.
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.
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.
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
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.
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.
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.
Moneyfarm stocks and shares ISA
£1500
0.75%
£0
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.
loading

Compare up to 4 providers

Data indicated here is updated regularly
Name Product Minimum investment Choose from Annual fee Brand description
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.
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.
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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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 lessthan you invest. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

In conclusion

Investing is no longer the preserve of the rich. You can start investing with very little money – with sums as small as a single pound in some cases, and with slightly larger but still entirely manageable monthly amounts in other cases. In fact, for such little money, why not have a go? You may get the itch to start putting more away. And as long as you are aware of the risks, and aren’t investing more than you can afford, you have the chance to start growing that portfolio sooner than you may have thought. You could begin right now.

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