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Want to start investing but don’t have a lot of capital. No problem. Here we show you how to invest with £500 or less, so you can start your investment journey. 

Invest with £500 or less 

An introduction to investing 

Investing is not just the preserve of the rich. Everyone has to start somewhere. Whether you have £250 you want to invest, or much more, there are some basic principles that can help you. You may wish to look only at small investments that make money, and that’s ok. Not everyone has millions to spend, or even wants to invest that much. 

After all, investing and trading can be risky. You can just as easily lose money as make money.  

What is investing? 

At its most basic level, investing is buying securities in the hope they well increase in value and make you money over the long term. Securities include assets like company shares, fixed-rate bonds, commodities like gold, index funds, and so on. 

The goal is to build up long-term wealth by building a portfolio to help gain the maximum profits available from capital gains and dividends, but minimising risks. Capital gain is the amount of capital you gain from investing. Dividends are paid by some companies to shareholders as a share of the company’s profit. 

The appeal of investing 

Whether large or small investments, the goal is to make money. In this way, investing your money into securities maybe more attractive to you then simply saving money.  

For example, the current Bank of England (BOE) base rate is 0.1%. This is used as a benchmark for lenders like banks. That would mean an annual return of 10p for every £100 saved at that rate. 

Stocks may be able to offer much larger returns. Let’s look at a long-term example. 

US stock markets have been on an upward trend for most of the last century. Stocks and dividends have been giving good returns over that period for some investors.  

If you had put £100 in an S&P 500-tracking mutual fund in 1990 and reinvested your dividends, it would have grown into £1788 by 2021. Conversely, if you had just kept investing at the BoE base rate, across the same period, the return on investment is likely to be substantially lower. 

It is recommended you hold onto your investments for at least five years to make any significant potential returns. Of course, the value of your investments may also fall in that time resulting in a loss. It’s very important to monitor your investments regularly, as well as underlying markets, so as to mitigate as much risk as possible. 


What can you invest in? 

With your initial £500, you have plenty of options open to you. Here’s a look at some of the most common securities investors choose to put their money in. 


When you buy stocks or shares, you are buying a small piece of a company. This is called equity ownership and another name for stocks or shares is equities. This means you are now a shareholder and are entitled to capital appreciation and dividends if the company pays them. 

A dividend is a portion of a company’s profits it can choose to return to shareholders. Not all companies choose to do this, as they may prefer to reinvest all profit back into the company. It can often be good idea to reinvest dividends back into the company you have shares in, as your wealth can grow quicker in this case. 

Dividends can also drop in value, much like share prices. If a company is struggling, it may also elect to withhold dividend payments. They are not guaranteed. 

Fixed-income bonds 

Bonds are essentially loans issued by a government or a company so they can raise funding. When you buy bonds, you receive a fixed-interest rate. This is paid either monthly or quarterly for the duration of the loan. Investors receive money back at the end of the loan period. This typically ranges from three months to 20 years. 

In the capital structure, bonds sit higher than stocks. That means, as a bondholder, you get paid before shareholders would receive dividends. There is always a risk that the government or company will not pay back at the end of the term.  


Commodities is a fairly broad church, but it represents tangible assets. Think crops, gold, precious metals, oil & gas. These are traded via exchanges, and physically buying these assets may be beyond your budget if you’re only looking to make small investments. However, you can get exposure to commodities markets by invest in exchange traded funds, which we will cover later. You can also invest in commodities manufacturers, producers, or miners by buying their stock. 

Exchange traded funds 

Exchange Traded Funds (ETFS), like other funds, are made up of a group of assets. These might be shares from a certain sector, commodities, bonds, or a mixture of different asset classes. The assets inside an exchange traded fund help track the performance of the fund’s underlying market as closely as possible.  

By investing in an ETF, you can gain exposure to an entire sector with a single trade, instead of investing in individual stocks. Some contain thousands of assets, whereas others are much smaller and more focussed.  

ETFs are listed on exchanges unlike other funds. 

Exchange traded funds are great for keeping up with trends. For instance, the ARK series of funds group together technological pioneers in various sectors like healthcare, disruptive technologies, fintech, and automation. 


Picking the right securities for your limited budget 

Because you are only doing small investments, you will have to think carefully about what you want to invest in. You are starting with a low base with your £500 or less, but that does mean you have less to lose. You could potentially take a bit more a gamble with your investments. Equally, you may want to invest in low-risk ventures over the long term in order to carefully grow your capital. 

Whichever approach suits your needs, it helps to do some research and analysis before you commit any capital. This will help you pick stocks, commodities or other securities you wish to invest in. 

You can do so with technical and fundamental analysis.  

Fundamental analysis is based around estimating a stock’s intrinsic value, i.e. how it is worth. This is where we measure qualitative and quantitative factors relating the economy, industries, and companies. So that looks at things like earning reports, company balance sheets, changes in personnel, company news, and if they pay dividends. 

Technical analysis looks at stock price data and movements. It includes analysing patterns and trends that may show future market movements. There are a lot of indicators to be aware of if you’re taking a technical approaching to selecting stocks. 

Our Investment Strategy Builder can also help you come up with an investment plan that suits your budget, your interests, and your investment goals.  



While you may only be looking at small investments, it’s always a good idea to diversify your portfolio.  

A diverse portfolio contains open positions across a range of instruments and assets. This way, you’re not overly exposed to a single type of risk. Investors and traders use a multi-asset portfolio to balance potential risks, which can help create higher returns in the long run. 

A diverse portfolio might look like this: 

  • 5% UK stocks  
  • 42% foreign stocks  
  • 44% bonds  
  • 4% short-term investments  
  • 5% commodities  

Because this portfolio contains a large variety of diversified instruments and asset classes, it would have lost less value than a portfolio comprised entirely of stocks. A stock-heavy selection may have also been quicker to regain its value, as stocks tend to capture a lot of market growth, but over the longer-term, a diversified portfolio would have a steadier income and lower risk. 

Remember, if you want to invest for £500 or less, you will have to carefully consider how far your budget can go. You may only be able to stretch it to a few different security types. Always carefully plan. 


Why not look at trading? 

You can make your £500 work for you with trading. Trading differs from investing in that you do not own the underlying assets you are trading on. Instead, you speculate on their price movements, up or down, by trading derivatives like CFDs or placing spread bets. With our platform, you can instead trade Contracts for Difference (CFDs). 

You use margin and leverage to trade these, basically making you money go further. How much you put down depends on your leverage ratio. For example, if you are trading a CFD with a leverage ratio of 30:1, aka a 3.33% margin rate, that means you can control a trade with a notional value of £3000 with only £100. 

There are, of course, risks associated with trading, so make sure you see our introduction to trading to learn the basics. 


Invest for £500 with 

Now you know about different options available to you, what type of analysis to do to help you build your portfolio, and how to diversify it, you’re ready to make some small investments. To invest with us, you will need to create a account. This will give you access to our Share Dealing platform and Invest Strategy Planner, and you can begin to invest in thousands of stocks, commodities, ETFs, and other securities from around the world. Open your account today to get started. 

We must reiterate that investing is risky. Only invest if you can afford to lose money. Be sure to do thorough research before you begin and always monitor your investment portfolio when you can.  

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