In terms of investment capital, 1000 pounds might not strike as a significant amount. However, in today's age, this figure offers a fantastic start in building your portfolio towards long-term financial stability.
This article explores how to invest £1000 in the UK. We cover a number of potential investments with varying risk/reward levels for your consideration. We will also explain what to look for while picking the right online broker when thinking about how to invest 1000 pounds UK.
How to Invest 1000 Pounds UK in Five Steps
If you are new to the investment space, here is a brief overview of how you can get started:
- Open a trading account with an online broker that gives you access to your chosen asset at a 0% commission rate - such as eToro.
- Deposit funds into your online broker account
- Locate the investment you want to buy.
- Enter the amount you want to invest in the chosen asset.
- Confirm your order by clicking on the 'Open Trade' button.
In case you need a more detailed explanation, we have included step-by-step instructions in the last section of our How to Invest 1000 Pounds UK Guide.
How to Invest 1000 Pounds UK – Best Investments List
If you want to invest 1000 pounds in the UK, here's a list of the top 10 investments to consider in 2021.
- FTSE 100 - Best Overall Way to Invest 1000 Pounds in the UK Market
- S&P 500 Index - Best Overall Investment in the US Market
- Tech Growth Stocks - Best Investment for Long-Term Above-Average Returns
- Bitcoin - Best Investment in the Cryptocurrency Market
- Mutual Funds - Best Investment for Complete Beginners
- Corporate Bonds - Best Investment for Fixed Income
- UK Savings Bonds - Best Risk-Free Investments
- iShares Core U.S. REIT – Best Investment for Real Estate
- Gold - Overall Best Way to Invest 1000 Pounds for Hedge Against Market Downturns
- eToro Copy Trading - Best Way to Invest 1000 Pounds Passive Returns
Top 10 Best Ways to Invest 1000 Pounds UK
For many beginners, when thinking about investing - the first thought that comes to mind is the stock market. However, today, there are a variety of other options that are also worth your consideration.
If you are looking for the best ways to invest 1000 Pounds, you might choose to invest in growth stocks or diversify your capital through an ETF. Another way to invest 1000 Pounds is by trading gold or through copy trading. Or you could enter the alternative financial scene by buying cryptocurrencies such as Bitcoin.
Ultimately, the type of asset you choose will depend on your financial goals and the risk you are willing to take.
Below we will further explain how to invest £1,000 in the UK.
1. FTSE 100 - Best Overall Way to Invest 1000 Pounds in the UK Market
Index funds are one of the best ways for those who seek a long-term investment portfolio.
For those unaware, the FTSE 100 is an index fund that tracks the top 100 stocks in the UK. These organizations share several common characteristics - such as a stable balance sheet, and are most likely leaders in their respective sectors.
We are talking about the likes of Rolls-Royce, BHP, Legal & General, British American Tobacco, and more. In other words, by investing in the FTSE 100 Index, you will be owning shares of all these giant names in the financial market - instead of having to choose a select few.
Moreover, the FTSE 100 is rebalanced every three months, ensuring that the companies included always remain relevant. As you can imagine, the cost of investing in this basket of companies would be high if doing it on a DIY Bais.
However, if you choose to invest in an ETF provider such as Vanguard or iShares, you will be able to gain access to the FTSE 100 without breaking your budget of 1000 pounds. These providers will buy stocks of FTSE 100 companies at a proportional ratio.
For instance, let's say that you want to invest your 1,000 pounds into the iShares Core FTSE 100 ETF. You can do this through commission-free broker eToro.
So, if BP shares are weighted at 3% - this means that you will own £30 worth of BP stocks, and so on.
Such index funds allow you to make money in two ways - one through capital appreciation and secondly through dividends. Meaning, you should get steady dividend payments every quarter. In terms of capital gains, the FTSE 100 has grown by over 22% between November 2020 to April 2021.
Take note, you can invest in an ETF that tracks the FTSE 100 at eToro without paying any commission - and the minimum investment is just $50 (about £35).
2. S&P 500 Index - Best Overall Investment in the US Market
Similar to the FTSE 100, the S&P 500 Index will get you access to the top 500 companies in the US financial markets. This choice of security is perfect for modest investments - by diversifying your funds into the shares of multiple top-performing companies.
The firms making up the index are also well-respected household names that dominate their particular fields. You will find companies along the lines of Facebook, MasterCard, Apple, Google, Tesla, Disney, and others.
The S&P 500 Index is primarily assessed based on market capitalization. In other words, a larger share of the exposure is given to bigger companies. As such, investing with this index allows you to tap into the wider US stock market.
In terms of investing 1000 Pounds, you will have to opt for an ETF or a mutual fund that allows you to track the S&P Index. We particularly like the Vanguard S&P 500 ETF or the iShares Core S&P 500 ETF.
An additional benefit of investing in this index fund is that your capital will be allocated into multiple sectors. The S&P 500 includes top companies in different fields, including real estate, telecommunications, financing, technology, and more.
3. Tech Growth Stocks - Best Investment for Long-Term Above-Average Returns
For those unaware, the stocks of publicly-listed companies can be divided into many categories. For instance, dividend stocks will get you regular returns; and blue-chip stocks are those of well-established companies with a proven track record.
Then there are growth stocks - which are companies that are expected to grow at a faster rate when compared to the wider market.
As you can guess, the technology industry continues to emerge as one of the top-performing sectors. When the rest of the world struggled to navigate the pandemic in 2020 - tech firms managed to come out ahead by offering innovative solutions.
For instance, take the case of Amazon - which is considered one of the best growth stocks in the US market. What started out as a retail company is now a multinational tech conglomerate with a focus on cloud computing, steaming services, AI, and above all - eCommerce.
Since the end of 2019, the value of Amazon stocks has grown by over 135%. If you had invested your £1,000 in Amazon then - you would now have over £2,350.
Other similar examples are companies like Tesla, Zoom, and Square - all of which saw high rates of growth in 2020.
In terms of how you can invest 1000 pounds in the stock market, then technology is one of the best industries to look into at the moment. That said, the share price of some companies might not fall within your budget. For example, a single Amazon share will cost you over $3,000 (about £2,100).
However, when investing via eToro - you can buy fractional shares. This allows you to buy any share of your choosing at a minimum of just $50 - irrespective of how much the stock is worth. So a 1000 Pounds would get you about 25 stocks.
Read More: What Are The Best UK Shares To Buy For 2021?
4. Bitcoin - Best Investment in the Cryptocurrency Market
If you are willing to take on more risk, the cryptocurrency markets could be a highly rewarding option. Digital coins such as Bitcoin are known for volatility - however, it is also the best-performing securities of the last decade.
In fact, ten years ago, Bitcoin was worth less than 1p per coin. Today, at the time of writing, one Bitcoin is selling for nearly $59,000 (approximately £42,000).
It is not only early investors that benefitted from this price surge. The digital asset has increased in value by 700% since 2020. In comparison, the FTSE 100 has, in fact, barely recovered from the pandemic.
That said, as we mentioned above, cryptocurrencies are also famous for increased volatility and risk. If you are comfortable taking on added risk, you can start investing in this digital asset at FCA-regulated broker eToro with just $25 (about 18 pounds).
Alternatively, you can also opt for a passive investment at eToro via a CopyPortfolio that centers around cryptocurrencies. This will allow you to diversify your 1000 pounds into not only Bitcoin but other digital coins such as Ethereum, Dash, Litecoin, Ripple, and more.
5. Mutual Funds - Best Investment for Complete Beginners
Mutual funds are professionally managed investments that will use your capital to invest in a variety of securities such as stocks, bonds, commodities, etc.
The mutual fund provider will decide which assets to buy, when to buy them, and how much to invest in them. Put otherwise, the entire process is passive. This gives you access to resources that otherwise might not have been available at your disposal - including expertise, capital, and experience in the wider financial markets.
Moreover, it is indeed possible to start investing in mutual funds with as little as £1,000. Investment companies such as Hargreaves Lansdown have options that start from £25 a month. You can decide to invest via a lump sum payment or sign up for monthly direct debits.
That said, you will have to do a bit of research to decide which mutual funds are worth considering based on your financial objectives. For instance, the Fundsmith UK Fund will give you access to stable companies with long-term potential, such as Facebook and Microsoft.
6. Corporate Bonds - Best Investment for Fixed Income
Another way to benefit from passive income is through corporate bonds. Compared to the annual yield offered by government Treasuries or Gilts, bonds backed by the private sector offer more favourable returns.
In simple terms, corporate bonds come with a fixed yield attached to them. For instance, if you choose a bond that pays 7% annual returns - it means that if you invest £1,000, you will receive an interest payment of £70 every year.
Similar to the mutual funds we discussed above, choosing the right corporate bonds also requires some work. There are several providers that offer high returns - such as the Bank of Ireland, which offers a running yield of 6.33%. Then you have Barclays with a yield of 7.6%.
However, it is crucial to remember that investments in bonds will be tied up until maturity. Meaning - there is very little liquidity available so you will need to wait until the bonds expire before getting your original investment back.
Alternatively, you can also choose to entrust your 1000 pounds to an ETF such as the Vanguard Total Bond Market. In doing so, the provider will take care of all bond investment aspects for you while you sit back and earn passively.
7. UK Savings Bonds - Best Risk-Free Investments
For those who would rather opt for a strategy that does not involve any risk, the best option is to invest your 1,000 pounds in a fixed-rate savings account. The only thing is to make sure that you choose a plan with a minimum lock-up period.
A majority of these savings bonds in the UK are provided by societies and banks. However, your returns will be limited to around 1%. In other words, on your £1,000 investment - you will only receive a yield of £10 per annum.
Therefore, if you choose a savings bond with a lock-up period of 3 years, this means that your money will not be accessible, and you get only £30 in return. The only benefit here is that your funds might be protected by the FSCS.
8. iShares Core U.S. REIT – Best Investment for Real Estate
Real estate might not be what comes to mind when you think of a 1000 pounds investment. However, with the right ETF, this option is no longer out of reach.
The iShares Core U.S. is a top real estate investment trust (REIT) that is currently available to UK investors. Put simply, iShares uses your funds to purchase properties and offers you a share of any earnings. This includes money from a sale or rental income.
Similar to ETFs, you can also find REITs that focus on special categories in the real estate market - such as commercial, residential, healthcare, or retail properties. You can make small investments into your chosen REIT and grow your money just like you would if you had invested in a property yourself.
9. Gold - Overall Best Way to Invest 1000 Pounds for Hedging Against Market Downturns
Shifting our focus to commodities - gold has always been favoured by UK investors as a means to hedge against unfavourable market conditions. In terms of returns, historically - the security has performed well, even during uncertain economic times.
You can invest in this precious metal by purchasing it in a tangible form - such as gold bullion or bars. However, the process can be cumbersome considering the logistics involved.
As such, the best option available today is to invest in an ETF that tracks gold. For your consideration, the SPDR Gold ETF is one of the most established gold funds that lets you make an investment in the metal indirectly.
The ETF provider will make the purchase on your behalf and take care of storage as well. Most importantly, you can cash out your gold ETF investment whenever you want.
10. eToro Copy Trading - Best Way to Invest 1000 Pounds Passive Returns
Since investing has moved to the online space, brokers have come up with innovative ways to help beginners make the most of trading.
One such feature is the CopyTrading tool offered by FCA-regulated broker eToro. Using this functionality, you will be choosing an experienced trader and copying their positions in your own portfolio.
Typically, trading requires years of experience. However, with the Copy Trading tool on eToro, you can benefit from the expertise of seasoned investors. The minimum investment is $500 per trader. If your chosen trader stakes 10% of their funds on a stock position - the same will be copied to your portfolio at 10% of your investment.
eToro provides you all the information required to choose a trader - including their returns, the level of risk they take, and so on. The key point is that there is no need for you to do any research in order to trade. Instead, you can benefit from the financial market in an entirely passive manner.
How to Invest 1000 Pounds UK - What to Consider
Although we have listed the best investments to consider, it is always recommended that you do your own research before risking any capital.
However, for a first-timer, it can be challenging to decide which investments are aligned with your financial goals. Therefore, we have created a list of metrics to consider when thinking of how to invest 1000 pounds UK.
Level of Risk
Regardless of how experienced you are, the risk you are willing to take should always be factored in when it comes to financial decisions. There is a certain degree of risk attached with every investment.
The only exclusion to this may be the FSCS-protected savings bonds. However, you are looking at little to no returns - especially when you consider inflation.
On the other side, the chances are that the amount of risk you take will be directly proportional to your returns. For instance, when you are investing in growth stocks, you are risking your capital on an idea that could be worth much more in the future.
However, the keyword here is 'could.' You should also understand that the market could go against you at any given point or that the company might not perform as well as you expected.
To sum up, you should always be aware of the risks involved when choosing how to invest 1000 pounds UK.
Type of Returns
The next consideration is to decide what type of returns you seek. For instance, some investment options - such as specific stocks, bonds, ETFs, and REITs, can get you access to regular income through dividends or fixed coupons.
At the other end of the spectrum, some investments generate earnings only in terms of capital gains. One example is Facebook stocks - which have increased by over 700% since the company was listed on the NYSE.
However, in spite of its performance, the company has not offered any dividend payments to its shareholders. If and when it does - stockholders will be able to merit from both capital gains as well as quarterly dividend payments.
Scope of Returns
Alongside the type of returns, you should also think about how much you would like to gain. It is natural to aim for higher yields. However, it is crucial to remember that such investments often come with the cost of added risks.
Regardless, investment choices such as S&P Index funds might give you a good balance between risks and rewards. This is because you are diversifying your funds by putting your money in more than one company - thus mitigating the risks.
Access to Liquidity
In the financial market, liquidity refers to how easily you can convert your investments into ready cash without it impacting the market price of the security. The extent of liquidity will depend on your chosen asset.
For instance, financial instruments such as ETFs allow you to cash in your investments at any given time. On the other hand, if you choose bonds, your money will be locked away until the date of maturity - limiting your ability to access liquidity.
Minimum Investment Required
Bear in mind that the majority of platforms have a minimum investment amount linked to different assets. For instance, Amazon stocks currently trade at $3,200. As such, on some brokerage platforms, you will not be able to buy Amazon stocks with only 1,000 pounds.
On the other hand, online broker eToro allows you to start investing in stocks and ETFs with as little as $50. For cryptocurrencies, the minimum investment is further reduced to $25. In other words, even with a limited budget of 1,000 pounds, you will be able to build a highly diversified portfolio.
How to Diversify a 1000 pounds Investment UK
Throughout this How to Invest 1000 Pounds UK Guide, we have emphasized the importance of diversification. In simple terms, this means that instead of putting your £1,000 into a single asset, it would be best to spread it across multiple securities - preferably in different sectors as well.
For instance, let's suppose that you invest £1000 into Facebook. If the value of the stock decreases over a prolonged period of time, you might end up losing a significant amount of money.
However, if you invest only 10% of your capital on Facebook, then your losses will also be limited. Moreover, if the other 90% of your investments perform well - you will be able to make up for the loss.
As you can imagine, it will take a considerable amount of research to decide upon a set of assets best suited for your investment goals. For this reason, many investors choose a FTSE 100 or S&P 500 Index that will automatically diversify your funds into stocks of multiple companies.
If you want to go one step further, you can also invest in different asset classes - as opposed to one category of security such as stocks. In this case, you will also be buying a selection of commodities, cryptocurrencies, and/or bonds.
At this point, we should mention that the online broker you choose can make this process easier for you by offering a commission-free trading service.
This brings us to one of the most important sections of our guide - how to choose the right online broker to invest 1000 pounds.
Best Broker to Invest 1000 Pounds UK
How to Select the Best Online Broker for your 1000 Pounds Investments UK
If you wish to make investments right from the comfort of your home, you will need to find a trustworthy online broker. To begin with, your chosen brokerage platform should give you access to your preferred financial instrument. In addition, it should also support small investments.
To help you along the way, below we have created a list of considerations you need to look for while selecting a suitable online broker to invest 1000 pounds.
License and Regulation
When it comes to choosing an online broker, safety and trust are crucial elements. You have to be 100% certain that the funds you deposit are secure, and are available as you need them.
In the UK, the FCA is the regulatory platform that ensures online brokers have investor protections in place. There are also several other well-respected financial bodies from different jurisdictions - including ASIC (Australia) and CySEC (Cyprus).
In short, if a broker does not hold a license from any such regulatory body - it is best to look elsewhere.
As we noted earlier, eToro is an online brokerage that is regulated by the FCA, CySEC, and ASIC. In addition, UK investors are also protected by the FSCS scheme.
Supported Asset Classes
Once again, diversification is an important aspect of long-term investing. Therefore, you need to make sure that your chosen broker gives you access to different asset classes.
After all, it will be easier to manage your investments through a single brokerage platform rather than to use different ones for each asset. With that said, FCA-regulated broker eToro gives you access to thousands of securities - including stocks, ETFs, cryptocurrencies, commodities, and indices.
When thinking of how to invest 1000 pounds UK, you should also choose an online broker that allows you to make smaller investments. This will give you the opportunity to diversify your funds by staying within your budget.
On eToro, you can begin investing with as little as $25. Additionally, you also have the option of fractional shares - meaning you can own stocks of expensive companies such as Amazon at a minimum of just $50.
When you make investments via an online broker, you are expected to pay fees and commissions. These are sometimes charged as a variable fee that is calculated against the size of your stake.
Trading commissions vary from one broker to another, as with any other financial platform.
- Let's say that your broker charges you a 1.5% commission for investing in stocks.
- This means that when you invest £1,000, you will have to pay £15 as a commission.
- When you cash out your investment - you will again have to pay 1.5%.
Although it might seem like a small amount - remember that you are likely going to make several investments. As such, the commissions can easily add up.
That said, by investing through eToro - you won’t pay any trading commissions at all.
Before making an investment, online brokers require you to deposit funds into your account. The best brokerage platforms give you a number of payment methods to choose from.
This ranges from instant bank transfers, credit/debit cards, as well as integrations with third-party e-wallets such as PayPal. Whatever your preferred option is, make sure that your chosen broker supports it.
How to Invest in 1000 Pounds UK Today via an Online Broker
Once you have narrowed down your investment choices, you can start investing through your chosen online broker.
Here is how to invest in 1000 pounds UK via FCA-regulated broker eToro.
Step 1: Open an Online Investment Account
The first step is to open an account on eToro. You can do this by filling out your basic information - including your full name, date of birth, and contact details.
As eToro is a regulated broker, you will be required to complete a KYC verification process. All this means is that you have to upload a copy of your passport/driver’s license and proof of address.
As long as you are not depositing more than $2,250 (about £1,600) - you can upload the documents at a later date.
Step 2: Add Funds to Your Online Investment Account
Add funds to your brokerage account using your preferred payment method. On eToro, you can do this through a bank transfer, credit/debit card, PayPal, Neteller, or Skrill.
Step 3: Make Your First Investment
As we mentioned earlier, eToro has a full suite of assets. When you know which security you want to invest in, simply search for it.
Enter the amount you wish to invest and click on the 'Open Trade' button to confirm your purchase.
That's it, you have completed your first commission-free investment on eToro.
eToro – Best Broker to Invest 1000 Pounds UK
eToro have proven themselves trustworthy within the industry over many years – we recommend you try them out.
67% of retail investor accounts lose money when trading CFDs with this provider.
How to Invest 1000 Pounds UK - Conclusion
By investing 1,000 pounds, the number one rule remains the same - never put all your eggs in one basket. With this in mind, we have given you a list of investments to consider - which includes index funds, ETFs, bonds, stocks, cryptocurrencies, and passive options such as Copy Trading.
That said, when thinking of how to invest 1000 pounds, you should also take into account your attitude to risk and required returns. This will make sure that you are choosing investments that align with your financial goals.
Ultimately, it is best to stick to an FCA-regulated broker such as eToro that gives you access to thousands of assets - all available on a commission-free basis and low investment minimum.
How to Invest 1000 pounds in the UK?
You can invest 1,000 pounds in the UK through an FCA-regulated online broker. All you need to do is to ensure that your chosen brokerage platform offers support for your preferred assets. On eToro - you will have access to a wide variety of asset classes - including equities, cryptocurrencies, commodities, ETFs, and more.
Which assets can I purchase with 1,000 pounds?
On platforms such as eToro, it is possible for you to start investing with as little as $25 into cryptocurrencies and $50 into stocks and ETFs. Therefore, you have a wide spectrum of investment options at your disposal.
How much can I earn by investing 1000 pounds?
Your returns will depend on the type of asset you choose and the risk you are willing to take. Securities such as growth stocks and cryptocurrencies offer higher return potential. Alternatively, you can also opt to diversify your capital by investing in an ETF.
Is Bitcoin a good investment choice for 1000 pounds?
Bitcoin is one of the top-performing assets of the past decade. However, it is also highly volatile and speculative. As such, if you are investing in Bitcoin, it will be best to stick to modest stakes and diversify the rest of your funds elsewhere.
How to invest 1000 pounds UK with minimum risk?
All investments involve a certain level of risks. If you are looking for a completely risk-free asset, then it is best to look for FSCS-backed UK savings accounts or bonds.