When you hear the word investing, it’s easy to imagine that you need thousands sitting in the bank before you can even get started.
But you don’t.
One of the biggest misconceptions about investing is that it’s only for people who already have lots of money. In reality, many investment platforms now allow you to start with surprisingly small amounts – and starting small can be a great way to learn without feeling overwhelmed.
I certainly didn’t start investing with a huge pot of money. I started with £25 in an index fund, continued to learn about the stock market as I went along and gradually became more confident about where I was putting my money and why.
If you’re wondering how to start investing when you don’t have much money, this guide will take you through some of the things I think are worth considering before you begin.
Important: This article is for general information only and isn’t financial advice. Investments can rise and fall in value, and you could get back less than you invest. Always do your own research and consider seeking regulated financial advice if you’re unsure what is appropriate for you.
Can You Really Start Investing when you don’t have much Money?
Yes.
You don’t necessarily need £1,000, £500 or even £100 to make your first investment.
Depending on the investment and platform you choose, it may be possible to begin with just a few pounds.
That’s partly because some platforms offer fractional shares, which allow you to buy a fraction of a company’s share rather than paying for an entire share which can be expensive.
For example, imagine a company’s shares cost £200 each. Traditionally, you might have needed the full £200 to buy one. Fractional investing could allow you to invest £10 instead and own a small proportion of a share.
Funds and exchange-traded funds (ETFs) can also provide ways of investing relatively small amounts while spreading your money across numerous investments.
The important question therefore isn’t necessarily:
“Do I have enough money to invest?”
A better question might be:
“Can I afford to invest this money without needing it back in the short term?”
Those are two very different things. Ideally you want to be looking at a 5 year time horizon to ensure your investments have time to grow.
Get Your Financial Foundations in Place First
I’m a big believer in starting rather than waiting for your finances to become absolutely perfect.
However, investing shouldn’t come at the expense of being able to pay your bills.
Before investing, it’s worth looking at your overall financial position. That might include:
- creating a realistic budget;
- starting an emergency fund;
- understanding and managing expensive debt; and
- making sure you have enough money available for your everyday expenses.
I’ve previously written about Building an Emergency Fund: Your Step-by-Step Guide to Creating a Safety Net, which is particularly relevant here.
An emergency fund gives you accessible cash for those wonderful little surprises life likes to throw at us – the broken boiler, car repair or unexpected expense.
Without one, you could find yourself having to sell investments at exactly the wrong time because you suddenly need the cash.
Investing is generally better suited to money that you won’t need immediately.
How Much Money Should a Beginner Invest?
There isn’t one amount that’s right for everybody. For one person, £20 a month might be completely manageable. Someone else might comfortably invest £200. The amount you can sustain is more important than choosing a random number. If £10 a month allows you to start investing while learning how everything works, there’s nothing wrong with starting there. You can always increase it later.
This is something I think gets lost in conversations about wealth building. We see people’s £50,000 portfolios online without seeing the £20 contribution they made years earlier when they were getting started. Starting small gives you an opportunity to learn about investing, experience market movements, fluctuations in value and understand your own attitude towards risk before larger sums of money are involved.
Make Investing Part of Your Budget
One of the easiest ways to invest consistently is to treat it like another item in your monthly budget.
Rather than waiting until the end of the month and investing whatever happens to be left, you could decide beforehand what amount you’re comfortable putting aside.
For example:
Income → bills → savings/emergency fund → investing → spending
Your exact order and amounts will depend on your circumstances.
Automating your investment can also remove some of the temptation to constantly decide whether this month is a good month to invest.
This is where budgeting and investing start working together.
Where Can You Invest Small Amounts?
There are now numerous investment platforms designed to make investing accessible to people who aren’t starting with enormous amounts of capital.
When comparing platforms, don’t simply choose the one with the prettiest app. Look at things such as:
Minimum investment: Is there a minimum deposit or monthly contribution?
Fees: What does the platform charge for holding investments, buying and selling, currency conversion or withdrawing?
Available investments: Does it offer shares, funds, ETFs or the investments you’re actually interested in?
Account types: Depending on where you live, there may be tax-efficient investment accounts available. Here in the UK, for example, Stocks and Shares ISAs can allow eligible investments to grow free from UK income and capital gains tax, subject to the applicable ISA rules and allowances.
Regulation: Check whether the provider is appropriately authorised or regulated in your country.
Fractional investing: If you want to invest small amounts in individual companies, check whether fractional shares are available.
I’ll add links below to some of the platforms I’ve used or researched personally.
HL – https://www.hl.co.uk/investment-services/isa
IG – https://refer.ig.com/louiseh-2988
Trading 212 – https://www.trading212.com/
What Should You Invest In as a Beginner?
This is where things can become overwhelming very quickly.
Shares. Bonds. Index funds. ETFs. REITs. Crypto.
Suddenly your plan to invest £25 has turned into three hours of Googling acronyms.
You don’t need to understand every possible investment before you start learning.
One important concept to understand is diversification.
Rather than concentrating everything in one company or asset, diversification involves spreading your investments. This can help reduce the impact that one poorly performing investment has on your overall portfolio, although it doesn’t remove investment risk altogether.
I’ve gone into this in more detail in How to Diversify Your Portfolio Like a Pro
Broadly diversified funds can provide exposure to many different companies through a single investment, which is one reason they’re commonly considered by long-term investors. Individual shares give you the opportunity to invest directly in particular businesses, but they also concentrate more of your money in individual companies. Neither should be bought simply because somebody on social media says it’s about to “go to the moon”. Please don’t let TikTok manage your retirement.
Don’t Underestimate Small, Regular Investments
Small amounts can look almost pointless at the beginning. If you invest £25 and check your account three weeks later, I’m afraid you’re probably not retiring. The power comes from time, consistency and compounding. Compounding happens when returns generated by your investments can themselves generate future returns. As a purely illustrative example, suppose someone invested £50 every month for 20 years and achieved an average return of 7% a year.
They would personally contribute £12,000 over that period.
If returns averaged 7% and were reinvested, the investment could grow to roughly £26,000.*
Increase the monthly contribution to £100 and the illustration becomes roughly £52,000.
That’s why I don’t dismiss small beginnings.
They can become the foundation for something much bigger.
I’ve explained the concept further in The Power of Compound Interest
This is a simplified illustration, not a forecast. Actual investment returns aren’t guaranteed and can be higher or lower. Fees, taxes and market movements can also affect results.
Don’t Wait Until You Feel Like an Expert
I certainly didn’t know everything about investing when I started. I still don’t. Nobody does. There will always be another investment strategy to learn, another company to research and another financial term you’ve somehow never encountered before. Education is important, but there is a point where researching can turn into procrastinating.
Start by understanding the fundamentals:
- What am I investing in?
- How does it make money?
- What are the risks?
- What fees am I paying?
- How long am I prepared to leave this money invested?
If you can’t answer those questions about an investment, do more research before putting your money into it.
Avoid Constantly Watching Your Investments
This is one I had to learn.
Once you’ve got money invested, it’s incredibly tempting to check it constantly.
One day you’re up.
The next day you’re down.
Then the market drops and suddenly you’re questioning every financial decision you’ve ever made.
Short-term market movements are normal. If you’re investing for long-term goals, constantly watching daily price movements can make it much harder to stick to your strategy.
It can also lead to emotional decisions — buying because everybody seems excited or selling because everybody is panicking.
I’ve written more about this in The Psychology of Investing: How to Keep Emotions in Check
Think Long Term
Investing isn’t a get-rich-quick scheme. In fact, if somebody is promising you guaranteed enormous investment returns with little or no risk, I’d be extremely cautious. For me, investing is about the long game. I’m building wealth gradually and investing is one part of my wider goal of becoming financially independent. That means I’m much more interested in what my investments could potentially do over 10, 20 or 30 years than what happens to them next Tuesday.
And that’s another reason you don’t necessarily need lots of money to begin.
You need time.
The earlier you start, the longer your money potentially has to compound.
How to Start Investing With Little Money: 5 Simple Steps
If you’ve made it this far and still don’t know where to begin, strip it right back.
1. Decide what you’re investing for.
Retirement? Financial independence? Building long-term wealth? Your goal will influence your timeframe and approach.
2. Decide what you can genuinely afford.
It could be £10, £25 or £100 a month. Don’t invest money needed for essential expenses.
3. Research an appropriate investment account and platform.
Compare regulation, fees, investment options and any tax-efficient accounts available where you live.
4. Understand the investment before buying it.
Don’t invest purely because somebody else owns it.
5. Keep learning and stay consistent.
Your knowledge and contributions can grow as your circumstances change.
Starting Small Is Still Starting
If there’s one thing I’d like you to take away from this article, it’s that you don’t need to be wealthy to start learning how to build wealth.
You don’t need the perfect portfolio.
You don’t need thousands of pounds sitting around.
And you certainly don’t need to understand every corner of the stock market before you’re allowed to learn about investing.
Start with your financial foundations. Learn the basics. Choose an amount that’s genuinely affordable. Understand where you’re putting your money.
Then give yourself time.
My own approach to money has evolved considerably since I first started investing, and I’m still learning and adjusting as I work towards my longer-term goal of financial independence.
Sometimes the most important investment isn’t the biggest one.
It’s the first one.