You’ve pulled together £1,000 and want to start your investment journey – but how do you know where to begin? With so many options on the table, how do you decide where you should put your money for the best return?
Glad you asked. With so many choices available, it’s important to understand your options and how you’re going to approach investing. To help you decide which investment opportunity is right for you, you’ll want to make sure you know:
- your investment goals
- how soon you want to see a return on your investment
- how comfortable you are with risk
Here’s the Minted guide to investing your first £1,000:
1. Build your emergency fund
It’s always a good idea to have cash you can access when life throws a surprise your way. If you would struggle with an unexpected bill or an income drop, then your first step is to build your emergency fund.
Building your emergency fund will give you peace of mind knowing that you have funds available to fix those burst pipes, car breakdowns and emergency trips to the vet. Invest £1,000 in an easy access savings account with the highest interest rate you can find. Keep it separate from your other accounts so you resist the temptation to dip into it for non-emergencies. You’ll be happy to have it when something unexpected happens (and it’s always when you least expect it).
2. Contribute to your pension
With the age of eligibility for the UK State Pension expected to increase, investing in your pension now means you’ll have more money when you’re ready to retire.
Make sure you’re enrolled in your workplace pension so that both you and your employer are putting money away for your retirement. In the UK, you can also open a Self-Invested Personal Pension or SIPP. With a SIPP, you can decide where to invest your money and have more control over your portfolio. You’ll also benefit from some pretty sweet tax efficiencies such as a 25% contribution from the government.
Think it’s too early to start saving for retirement? Think again! Thanks to compound interest, the earlier you start to invest in your pension, the more your pension pot will grow. Investing £1,000 in a long-term SIPP now could make a significant difference to when you can stop working and the type of lifestyle you can have in your retirement.
3. Buy gold
Investors have seen gold as a good investment for centuries and that still holds true today. If your emergency fund is already topped up, gold is another great place to put your £1,000. Here are a few reasons why:
- Gold as a store of value has been around for nearly 2,000 years. It won’t be going away any time soon.
- Gold is tangible and cannot be created out of thin air. This is not the case with currencies like the pound sterling.
- Gold beats inflation. Your gold investments won’t lose value over time.
- Gold is low risk. Businesses going bankrupt and tweets from politicians won’t dramatically affect the price of gold.
Gold has risen in value by 36.6% since 2010, far outstripping any gains from savings interest over the same time period. Gold is a low-risk, safe investment over the long-term. Learn more about gold on our Minted blog:
4. Open an ISA
Another good way to invest long-term is to put £1,000 into a UK tax-efficient Individual Savings Account, or ISA. There are different types of ISA to suit different investment goals, so it’s important to do your research beforehand. For example a Cash ISA is a great place to put your emergency fund, a Help to Buy ISA is for first time home buyers and a Stocks and Shares ISA for tax-free investment in funds, stocks or bonds.
You can split your investment over different types of ISA, giving you more control over your portfolio. You might want to invest your £1,000 in a Cash ISA and take advantage of tax-free interest. Or you might want to use a Stocks and Shares ISA to invest in stocks and Exchange Traded Funds (ETFs) with no tax on profits, interest or dividends. Be sure to choose the right ISA to avoid having to pay fees or charges that might cancel out your tax benefits.
5. Invest in yourself
With so much change in the world right now, many of us are re-examining our priorities and goals in life. If you’ve identified changes you’d like to make, you could also invest your £1,000 in yourself. What does that really mean? Here are some examples:
- Health: if you’ve decided to prioritise your health, getting some home gym equipment or hiring a personal trainer could help you hit your fitness goals.
- Career: an online course might get you ready to start your own business.
- Hobby: start a new hobby such as playing an instrument or learning a new craft.
If you’re prepared to commit to making changes, your £1,000 could help you make a priceless transformation in your life. And you don’t have to put all the money into one investment – some could be used to buy gold, some for your pensions and the rest for yourself. Don’t underestimate what you can do with your first investment. Not only could it earn you financial rewards, but it will also give you confidence in your future investment decisions.