Here are a few things to consider when you start your investment journey:
Debts and emergency savings
Before you invest £100, could it be used better? It might seem obvious but if you’ve got unsecured loans and credit card debt with high interest payments, you should pay them off first — your debt will grow faster than your investments can ever grow. Secondly, it pays to have a small emergency cash fund – we usually recommend between 1 and 3 months’ outgoings — so you have something to fall back on.
Decide on your investment goals
What are you hoping to achieve through investing? Are you looking to save for a specific goal, such as a down payment on a house or your children’s education? Or are you more interested in long-term growth? Understanding your goals will help you choose the right investment strategy. For example, if you’re saving for a house deposit or if you need the cash in five years or less, it’s not a good idea to invest. That’s because your investments can go up and down in the long run.
Choose the type of investment
There are a variety of investment vehicles available to investors, including stocks, bonds, investment funds (also known as mutual funds), and Exchange-Traded Funds (ETFs, these are just like ordinary funds but they can be traded on the stock market just like stocks). They all have their own advantages and risks, so it’s important to do your research and choose the one that aligns with your investment goals.
Understand the risks involved
All investments come with some degree of risk. Make sure you understand the risks associated with your chosen investment vehicle and consider seeking professional advice if you’re unsure. It might be tempting to plunge straight in and pick individual stocks, but picking individual stocks is hard to get right and takes up a lot of your time. Investment funds (sometimes called mutual funds) or ETFs are a great way to diversify and gain exposure to the market.
Start small and diversify
When you’re first starting out, it’s often a good idea to start small and diversify your investments. This can help reduce your overall risk and give you the opportunity to learn more about investing without risking too much of your money. Using ETFs and investment funds is a great way to diversify and spread the risk. Even if you invest £100!
Where to invest: Do It Yourself (DIY) or Do It For Me (DIFM)
If you invest £100 a month you can choose to go down the DIY route and pick your own investments on an investment platform (click here for a list of providers or here to use the platform finder). Many have recommended fund lists or baskets of funds that you can choose.
However, if the idea of picking your own investments makes you want to scream, then picking a digital investment app or robo adviser that does it for you, may be the best option. What’s more they’re ideally suited for investors who want to start small and invest £100 and grow their investments.
Digital investment apps (or robo-advisers as they’re sometimes called) are automated investment providers that use algorithms to create an investment portfolio based on your investment goals and attitude to risk. The portfolios invest in Exchange-Traded Funds (ETFs), which are designed to track a specific index. ETFs are managed passively, meaning that they aim to replicate the performance of the underlying index or assets, rather than trying to outperform the market.
Keep an eye on your investments
Once you’ve started investing, it’s important to keep an eye on your investments and make adjustments as needed. Regularly review your portfolio and consider rebalancing your investments if necessary — but also consider the market context — remember that investing is for the long run so expect some bumps along the road.
Overall, investing can be a great way to grow your wealth over the long term, but it’s important to approach it with a clear strategy and a solid understanding of the risks involved. With just £100, you can start your investment journey and potentially see your money grow over time.