How much money do I need to start investing?

Published by Marina Gerner on 06 July 2016.
Last updated on 07 July 2016

You don't need to have plenty of disposable income to start investing; those who invest regularly can commit as little as £50 a month.

Regardless of how much you may have - those who invest little amounts over the long term on a regular basis, are likely to see their money work much harder for them than those who let their money sit in a low interest paying savings account.

Here we run through how much money you actually need to become a DIY investor.

Regular investment thresholds are lower

If you choose to invest regularly, say on a monthly basis, the minimum amount required tends to be lower than the amount required if you want to invest a lump sum.

Many online investment platforms offer the option to invest a monthly sum into a stocks and shares Individual Savings Account (Isa).

The monthly amount can be as little as £20 on Interactive Investor, £25 on rplan and Hargreaves Lansdown and £50 on both Charles Stanley and Fidelity if you invest regularly in an Isa.

Lump sum investing

The minimum lump sum investment into a fund varies. For example it can be as little as £50 online broker, but rises to £100 on Hargreaves Lansdown and £1,000 with Fidelity.

However, it is important to remember that platforms charge various fees - including exit fees in some cases; as well as platform fees and the ongoing fund manager charge.


Therefore it is important to consider whether the potential gains on a small sum outweigh the potential charges it entails.

Investments to choose from

There are various investment 'products' you can choose from. You can, for instance, decide to invest in 'actively' managed funds. These funds are run by fund managers, and they tend to focus on a region and a specific type of asset (equities or bonds, for instance).

There is often no charge for trading funds because they are sold in 'units' rather than shares. But you will still incur a broker platform fee and also a fee you pay to the manager the ('ongoing fund manager charge').

For an equity fund, for instance, a typical manager charge is 0.9% of the amount you invest per year. 

Alternatively, you could opt for investment trusts, which are similar to funds but have a different structure in that they are 'closed ended' and they are listed on the stock exchange, which means they are sold in shares.

There are also exchange traded funds (ETFs), which are 'passive' funds that run on an algorithm and track a certain index, rather than being 'actively' run by a human manager.

These funds tend to have much lower fees. The cheapest cost less than 0.1%, but some command a fee of 1%, so it is important to look at the price tag before buying.

Various studies over the years have concluded that passive funds tend to beat active funds over various timeframes across different equity markets. 

There are thousands of funds to choose from so it can be confusing. For tips on easy ways to start investing in funds, visit Moneywise's First 50 Funds for beginner investors

In contrast to funds, both ETFs and investment trusts incur additional trading charges, because they are sold by shares. These costs range from £1.50 to £12.

Every online broker platform has a different fee structure, and some are more transparent than others. Some fee structures are better suited to larger sums whereas others work better for smaller sums.

Peer-to-peer lending

Another type of investment you might want to consider is peer-to-peer (P2P) lending. Online P2P lenders match individual borrowers with savers who are willing to lock away their money for a certain amount of time to get a return.

Some P2P lenders offer a low minimum investment threshold: £10 is the minimum investment on both P2P lenders RateSetter and Zopa.

However, Zopa recommends a minimum investment of £1,000 to its customers and you get a better return on your money if it's locked in for a certain time period.


Robo-advisers: model protfolios

Another way to invest in the stock market is through robo-adviser platforms, such as Nutmeg or Wealthify, which offer ready-made portfolios depending on the level of risk you'd like to take.

The portfolios on these platforms tend to mainly consist of ETFs as well as some actively managed funds.

The minimum investment on Nutmeg is £500 and they charge 0.95% on amount of up to £25,000. Wealthify has a lower investment threshold at £250 and it charges an annual fee of 0.7%.

This article was originally written for our sister magazine, Money Observer.

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