Whether you have £100 or £1000, you may be wondering how do you actually start investing.
There are many investment vehicles you can choose e.g. property, stock market, business etc.
In this article, I will talk about how to invest your first £1000 into the stock market in the UK:
Before you start investing, the first step is to make sure that you are indeed ready to invest.
Once you’re ready, the next step is decide what platform to use i.e. Vanguard, Fidelity, etc.
From there, then decide what tax-advantaged account to open i.e. ISA, SIPP, Pension, etc.
Finally, you then decide what fund you want to invest in i.e. mutual fund, index fund, etc.
In this blog article, I talk about whether you are ready to invest and what platforms to choose.
I also discuss the different account types you can choose as well as the fund types to go for.
Finally, I go through what to do after you’ve invested and where to go for more information.
Are You Ready to Invest?
I know – why would you ask me if I’m ready to invest as opposed to telling me how to invest?
The fact is just because you have spare money to invest, doesn’t mean you are ready to invest.
People like to dive in when it comes to investing, however little knowledge can be dangerous.
That’s why there are a few steps that you need to carry out before you invest your first £1000:
Create an emergency fund with £1000 before you invest it: you never know what can happen.
Pay off expensive debt first: not all debt, just any debt with an interest rate of 5% or more.
Increase your emergency fund: £1000 is not enough, in case you lose your job for example.
Be sure you don’t need that money any time soon; the last thing you want is to withdraw it.
Once you pass all of these requirements, then you are ready to start investing your first £1000.
To find out more about if you are ready to start investing, check out my article for more info.
Choose Your Platform
Once determined you are ready to start investing, the next step is to choose your platform.
Also known as a provider, a platform is the company that will allow you to access the markets.
There are plenty of potential providers such as Vanguard, Fidelity, Hargreaves Lansdown, etc.
There are even providers that you can use just from your phone: Trading212, Robinhood, etc.
So the question is: which platform/provider should I use to invest my first £1000 and beyond?
The provider I personally use is a platform known as Vanguard, used by investors worldwide.
There are a few reasons why I use them: they charge low fees and give access to many funds.
There are many fees providers charge the investors; Vanguard offer one of the lowest overall.
As well as that, they give access to many funds that have a great performance with low fees.
These are just some of the reasons why Vanguard is where I would invest my first £1000.
Choose Your Account
Once you have chosen your platform to invest in, the next step is to choose your account.
Even in stock market investing you have to choose an account type with your chosen provider.
Think of it as opening a new bank account: do you want to open a current or savings account?
However, there are 3 account types that you can choose from: ISA, SIPP, or General Account.
Individual Savings Account (ISA): Allows you to invest £20k a year tax free; withdraw anytime.
Self Invested Personal Pension (SIPP): You receive tax relief but can’t access it before age 55.
General Account: No limit to how much you can add to it but it’s taxed on the way in and out.
Personally, the type of account that I have within Vanguard is an Individual Savings Account.
The main reason is being able to access it before 55, as I plan to retire much sooner than this!
You can find out more on Individual Savings Accounts by checking them out on Vanguard UK.
Choose Your Fund
Once you have your platform and account, the last step is to choose which fund to invest in.
Think of a fund as a collection of stocks and/or bonds that you want to invest your money in.
You have actively managed funds, which are managed by fund managers, and passive funds.
You have funds that invest in stocks and shares, some in bonds, and some that invest in both.
With all these options what is the best fund to invest £1000 that will give you the best return?
The fund that I invest in is the FTSE Developed World ex-U.K. Index Fund for many reasons:
Firstly, an Index fund is a passive fund meaning it charges low fees and gives a good return.
It is a global fund, invested in over 2000 companies worldwide, meaning good diversification.
These are just a few of the reasons why I invest in this Index fund within my Vanguard ISA.
To find out more about this Index Fund, check out my article where I explain it in more detail.
What Happens Next?
That’s it; that’s all you need to know to be able to invest your first £1000 in the stock market.
Your action steps: choose your platform, choose your account, and invest in your chosen fund.
What happens after that? You repeat the same process over and over again on a regular basis.
You don’t to invest once, but to keep investing until you are able to live off your investments.
How much money do you need to invest to retire? Check out my early retirement series here.
To find out more about Index fund investing, check out the book The Simple Path to Wealth.
In this book, the author talks about how you can use Index Funds for investing and retirement.
Are you currently investing? If so how is it going? Please let me know in the comments below.
If you enjoyed this article, you can check out my other posts on investing in the stock market.
If there are any other investing topics you would like to discuss let me know in the comments!
