How to invest £1,000
We know that these days money is sometimes hard to come by, but when it does, you should use it wisely. For argument’s sake, let’s say that you came into £1,000. Maybe you got lucky with your premium bonds, received a bonus from work, or even cashed out a little too early on Who Wants to be a Millionaire; whatever your reason, you have £1,000 and it’s burning a hole in your pocket. If you are one of the frugal few who resists the ‘urge to splurge’ and are happy to push temptation aside in favour of more economical options, you can build your lump sum in no time. At the end of the day, £1,000 is a lot of money, so it makes perfect sense to make the most of it. Many people would feel inclined to keep this money tied up in a bank account, earning them next to nothing. Whilst there’s nothing wrong with saving, investing can see you earn some interest on top of your existing capital. All sounds great, right? In a word yes. But, there are a few things that you need to consider before you make an investment. Is investment the right move for you? Can you afford to invest your money? What are the risks? If you’re wondering how to invest your £1,000, you’re not alone.
Firstly, let’s cover the pros and cons of both investing and saving.
1. Emergency funds
If you like to have a cushion to fall back on in case of an emergency, saving money is usually at the top of the agenda. By having a supply of funds that you can dip in and out of when you need to, you’re safeguarding yourself in case you ever fell into any significant financial difficulty. Having a little bit of money put aside gives you that extra peace of mind if things ever went wrong. A general rule of thumb is that at any one time, you should have at least 3 months’ worth of living expenses saved in case you need to access them. This should cover the essentials- food, rent and other outgoings.
2. Lower risk, lower returns
If you’re in no great rush to add money to your existing savings having your money sit in a bank account (earning next to no interest) saving isn’t necessarily a bad thing. Plus, if there ever was a financial crisis your money would be protected up to £75,000 by the FCS. Whilst it’s unlikely that it would happen, never rule it out any degree of risk. Do we have to mention the financial crisis of 2008?
3. Short-term goals
Saving your money is usually linked to achieving short-term financial goals. Saving for a wedding, saving for a holiday etc. Saving usually allows you to achieve short-term goals in a relatively small timeframe (a few years max). Think piggy banks but on a larger scale.
1. Looking to the future
When investing people are usually looking to their future. People may use investing as a vehicle to achieve milestone objectives such as saving for retirement or paying for a child’s tuition fund. Investing may even be used as a method to supplement a secondary income.
2. Potential for profit
Investing provides individuals with the potential to earn higher returns than what they would have earned through an average savings account. Whilst the potential for profit is much higher, it’s also important to bear in mind the increased chances of exposing yourself to risk.
Unlike saving, investing is done with a mind to generate returns. With this comes a degree of uncertainty, but also the hope that whatever money you do invest you will be boosted by a comfortable profit. Investments make your cash temporarily inaccessible, at least for the short term. You should be comfortable enough to be able to live without the cash until your investment matures.
How to invest £1,000
Hopefully, by now you’ve been able to decide whether investing is for you. Thinking about where and how to invest £1,000 usually high on the agenda at this point. You could invest in a business, invest in an education, or even invest in stocks and shares- the world really is your oyster.
In the world of investing £1,000 isn’t traditionally considered a substantial amount of money. So, contemplating how to invest £1,000 can prove quite the quandary. Where’s the best place to place your money? How can I make the most of what I’ve got?
Regardless of what’s considered a ‘suitable’ amount of money to invest with, it’s essential that you take your own circumstances into consideration. What’s a small amount for someone else might not be so small to you.
Nonetheless, if you’re looking to earn some interest £1,000 is an ideal place to start- even more so when you consider the rules of compound growth and rolling interest.
What is £1,000 today could well be worth double the amount in ten years’ time with the help of a 10% interest rate. Whilst there are many investment platforms out there that facilitate investments below £1,000, the interest that you may earn on such an investment is comparably negligible. For many of you, this is fine, especially if you want to grow your money on a much smaller scale. But for others that are looking to make a bigger impression on their finances, £1,000 is often considered to be the minimum benchmark.
The HouseCrowd, for example, offers investors the opportunity to invest from as little as £1,000 across a range of property development and p2p loans.
With the relative stability of property, it’s fair to reason that you wouldn’t be subject to the same volatility and unpredictability as stocks and shares.
Whilst you can never guarantee anything in the investment industry, property does tend to be more predictable. It’s also relatively easy to gauge when property prices will surge, particularly in a certain region- you just have to know to what to look out for. So if you’re looking at how to invest £1,000, property investment is, by all accounts a sensible avenue to explore.
If you would like to view our investment opportunities or would like to learn more about our unique property investment model, visit our website,