6 ways to start investing with small amounts of money

23 December 2020 | Posted by Henry Collie
wallet with small note

It’s easy to make money when you’ve already got it… So many people seem to bandy that maxim about. It’s not necessarily untrue, but it implies that you can’t make money when you have little to spare, which simply isn’t true. No matter how little cash you have to spare, it’s possible to invest small amounts of money.

Of course, there is an equally bogus opposite. We’ve all heard those over the top rags to riches stories. You know the type: a celebrity investor says they had to sleep in their car or sell their left shoe for food. But their stories always work out, thanks to their absolute devotion to unhappiness and monkish austerity.

Thankfully, most of those stories are exaggerations. You don’t need to live in your car to grow your money. You don’t need to be rich already—that just makes it easier. Neither must you abandon your family and/or ‘find yourself’ in a Phuket Monastery.

In this post, we’re going to explore:

  1. How can I invest small amounts of money?
  2. Different options for investment
  3. How can I protect myself from risk?

That’s a lot to get through in three minutes, so let’s get going.

Start investing early

Imagine you invest £20 per month into an index tracker, increasing your deposits with inflation at 2%, with an average ten-year return on investment of 9%. Let’s say you want to invest until you’re 50-years-old.

Here’s what happens when you start at 30:

A bar chart showing compounding investment returns over twenty years.
This is for illustrative purposes only.

At this projection, you would deposit £5,852.48. But you could make an extra £9,060.96 through compounding interest. That’s a total of £14,913.44—for twenty quid per month.

Now, what if you start from the age of 40?

A bar chart showing compounding investment returns over ten years.
This is for illustrative purposes only.

In ten years, you would have deposited £2,647, with an extra £1,526.14 ROI and a total value of £4,173.14. You would still have invested for ten years but end up with almost four times less money.

It doesn’t matter how little you have; the earlier you start, the more you’re likely to make.

Please remember that when investing your capital is at risk, and you may recover less than the original investment.

6 ways to invest small amounts of money

So, you’ve searched the web for ‘start investment’ and ‘how do I invest small amounts of money?’ and read every piece of information you could find.

You’ve put money aside, but how do you actually start investing? It’s not like you can just pop onto Amazon and click ‘Invest now!’ We’re going to go through that next.

Remember, it’s a good idea to diversify your investment portfolio, no matter how little you’ve invested. That way, you’re less likely to lose all your money on a single investment. Also, no matter how or where you invest, you could end up with less than you put in.

Here are six ways you can invest that spare cash. Some of these could be great investments; others, not so much.

1. Funds

If you buy into a fund, your money gets pooled with that of other investors. Usually, these funds will be based on a theme. You could invest in a fund based on geography, particular industries—such as green energy—and much more. Index funds.

An index fund manager will invest your money into a set number of assets according to pre-decided rules. These funds track a market as it rises and falls. Think, FTSE 100 or S&P 500. Exchange-traded funds (ETFs) are similar, except these funds are assets in and of themselves, traded on the public market, like stocks.

Using the Claro app, you can go one step further, and invest in a ready-made portfolio made up of different funds. Learn more about investing on Claro. As with all investing, your capital is at risk.

2. Online investment platforms and apps

Online investment platforms make it easier and more accessible to start an investment, no matter how much money you have. Some apps will even round up your spare change and then invest your money for you.

Using Claro, smart investing is easy, however much you have. As with all investing, your capital is at risk.

3. Stocks and Shares ISAs

In the UK, anyone over the age of 18 can get an ISA. With an ISA, you can save up to £20,000 per year (in the tax year 2021/22) and won’t have to pay any tax on your interest, bonus payments or investment profits.

With a Stocks and Shares Lifetime ISA, you can save up to £4,000 per tax year, and you’ll get a 25% bonus from the government each year on deposits, with a maximum bonus of £1,000 per year.

On Claro, you can open a Stocks & Shares ISA or a General Investment Account – learn more about the difference between the two.

Here’s the full lowdown on ISAs from the government website.

4. Full shares

You could buy individual shares. If you want to do this, you can purchase stocks through an online platform or a broker, like a high street bank. This may not be the right investment for beginners. If you have access to little money, you may only be able to afford less valuable stocks. If, however, you would like to invest in behemoths—like Amazon or Tesla—there is a way…

5. Fractional shares

Some platforms will buy full shares, then resell you a fraction of one share. They provide a way of owning a bigger variety of stocks with the same amount of money. For example, if Amazon’s stock is priced at $2,691.43 per share but you have only £25 to invest, you could buy almost 1% of one share with your money. This comes with the same risk as purchasing full shares.

6. Binary options, a.k.a. ripping a fiver in half to make two fivers

Okay, so this sixth one may not be a good way to make money. Actually, it could be a phenomenal way to lose money!

Forget the ‘secret tricks’ and ‘fool-proof methods’ espoused by the Instagram Options Bros. Binary options ‘trading’ is not investing—it’s gambling. Worse, many ‘brokers’ have a house edge that puts blackjack to shame.

Retail trading of binary options has been banned in the UK.

A note on risk

All investments carry risk. You should perform due diligence before handing your money over for anything. Before you start investing, make sure to use a reputable platform or broker.

You can check the FCA’s financial services register to see if any company is listed on their register. If a company is not registered there, most likely it cannot do business in the UK, leaving you unprotected. You should run away – very fast!

You’d be better off in that Phuket monastery.

Key takeaways

  • No matter how little cash you have, you can invest small amounts of money.
  • You can invest as little as your spare change through online platforms and apps.
  • You can invest in a stocks and shares Lifetime ISA and receive a 25% bonus on all deposits up to a maximum bonus of £1,000.
  • If you’re going to trade binary options, you might as well burn your money instead.


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Our website offers information about budgeting, planning, savings and investments, but never personal advice. If you’re not sure what financial products are right for you, including investments, then please seek professional financial advice from a certified & regulated independent financial advisor. If you do decide to invest please remember that investments can go up and down in value, so you could get back less than you put in and your capital is at risk.