How to invest £1,000


Is this your first time and you are wondering how to invest £1000? If so, welcome to investing! With £1,000 to invest, you’re able to make a decent start on building a portfolio. You can afford to mix and match different types of investment, which makes your overall portfolio stronger. And you can access a good range of platforms, giving you the freedom to choose a service that suits you. But what does all this mean? Let’s get into it…

First of all, set some investment goals

What are you investing for? Do you have a particular use in mind for the money, like a house deposit or university fund, or are you simply hoping to grow your long-term savings? It’s important to know because it informs how long you will need to stay invested.

If you’re looking at a timeframe of less than 5 years, you might be better off sticking with cash than investing. This is because, to put it simply, the stock market has good years and bad years. It doesn’t matter so much with longer timeframes as, in the long run, investments tend to do far better than cash. But if you need to withdraw your money at short notice and can’t afford to wait for a ‘better year’, you run the risk of making a loss.

Understand the risks and rewards of investing

We’ve already mentioned what could happen if you become a forced seller who can’t afford to wait for a better year, but that’s largely about patience and planning. Usually when talking about ‘risk’ in investments, what we actually mean is volatility. If one investment is labelled as being riskier than another, it’s because its value is likely to rise and fall more significantly.

Potentially, you could earn a lot more from a high-risk investment, but you could also lose more if you become a forced seller. Neither are better or worse – it’s a matter of preference. If you’re still wondering how to invest £1000, why not take a bit of both?

Choose DIY investing or leave it to the pros

Are you keen to do your own research, pick your own investments and decide for yourself how to invest £1,000? Or would you prefer for someone to say, “Here’s one we made earlier”?

These days, you really don’t need to know much about investing to be an investor. Lots of providers will have ready-made options to choose from, based on risk level or other themes. There are even so-called robo-advisers, which are basically just apps with multiple-choice questions that match you to an investment portfolio. Well worth a go if you aren’t that interested in the nitty-gritty.

If choosing your own investments, diversify!

Investments come in all shapes, sizes and flavours. There are stocks, bonds, funds, ETFs, the list goes on. For your first £1,000, we’ll assume you’re not super confident about picking individual company stocks, so you’re probably better off with funds and ETFs (exchange traded funds). Why? Because each fund is a collection of smaller investments, often containing stocks, bonds, gold, property and all the rest, all in one place.

It’s key to mix and match when investing, so you don’t have all your eggs in one basket. This mixing and matching is called diversification, which you may hear a lot of. Funds are great because they diversify for you, and with £1,000 you can afford to buy a handful of them. Perhaps mix some high-risk funds with some low-risk funds, if you’re up for it.

Compare investment platforms to find the one for you

Your investments will need an account to live in, so what type do you need and which investment platform should you open it with?

First off, the account. With £1,000 to invest, you’re probably best off with an ISA because it’s tax-free up to £20,000. That being said, if you’re saving for your first house then a LISA may be a better fit. And if you’re saving for retirement and won’t touch the money until then, consider a pension.

When you know what you want, it’s time to compare the platforms. Each of them have different fee structures, support options, additional services and so on, so see what’s on offer and don’t be swayed by extra services you won’t need. To make it super easy, you can let an investment calculator do the hard work for you. And, would you believe it, we have one right here at Compare & Invest.

So happy investing, good luck, and we’ll see you on the comparisons tools page.