7 Ways of Investing Money in the UK You Can Benefit From

If you are new to investing and would like to have a quick overview of the most popular ways of investing money in the UK, you are in the right place.

Investing money as a part of a personal financial strategy is becoming more accessible in the age of tech and therewith a more sought-after alternative. The underlying idea is to make your money work for you and generate passive income.

According to Finder, 2.2 million people in the UK were subscribed to a Stocks & Shares ISA account in 2019. But investing in stocks and shares is not the only way to multiply your wealth, achieve financial freedom or secure retirement. We don’t intend to create the next investing guide but we will highlight the most popular investment options and provide links to sources where you can find more information.

3 Golden Rules Of Investing Money:

  • Prepare to lock away your money for min. 5 years while 10 or more years is recommended
  • Don’t invest more than you can afford, i.e. cover your expenses and fill your safety bucket first. Please see our guide to budgeting money and building wealth for more information.
  • Diversify – don’t put all your eggs in one basket. Different geographical and industry footprint, as well as forms of investment, are crucial.

1. Automatic Micro-investing tools to start investing with little money (from 1£).

If you are not sure if investing in the stock market is for you, why not try out one of the progressive micro-investing apps where you can start investing with as little as you like. Make it automatic and regular to stay committed. Best known apps are:

If you like using these so-called passive-investing, user-friendly tools and want to invest larger amounts, we recommend checking your options to see which one delivers the best diversification for you. E.g. if the fund you’re looking at is invested into the same or very similar composition of stocks as your pension fund, you probably should look for another alternative to diversify and reduce risk.

2. Index funds reflecting market average

If you have more than £500 to invest, you can start investing in index-tracking funds of your choice. The value of such funds rises and falls according to the share-price performance of the companies listed on the index they follow. In the UK, the Financial Times Stock Exchange 100 (FTSE 100) comprises the 100 largest companies listed on the London Stock Exchange. The biggest Index for Germany is called DAX. If you invest in the US market Index Fund S&P500 – you’ll own shares of the 500 biggest companies in the US including Google, Amazon or Apple.

We like Vanguard for its philosophy and low management charges but this is by far not the only solution. Mamafurfur, a UK blogger compared the fees of a few other platforms.

3. ETFs and mutual funds

Funds are built to offer you diversification and not all of them track market indexes. There are plenty of other funds in the market with unique compositions for all risk and differentiation profiles. Choose wisely and beware of platforms with high fees.

4. Build your own portfolio

You can build your own portfolio buying and selling individual stocks, bonds and commodities. This requires lots of market knowledge and is time-engaging if you want to do it right. This option is usually riskier than investing in funds. Boring money blog has a good overview of the most popular investment platforms in the UK.

5. REITs

Instead of investing in just one or two buy-to-let UK properties, you can profit from the UK property market by investing in REITs (Real Estate Investment Trusts). REITs purchase income-producing real estate assets. Individual investors pool their money together and receive 90% of REITs property income every year as a pay-out. Have a look at money advice service to expand your knowledge.

6. Crowdfunding

Another, less known way of investing money in the UK is Crowdfunding. If you are adventurous with a higher appetite for risk, you can turn to crowdfunding platforms in the hope for good returns. They enable small businesses to raise funds necessary for further growth. Growthbusinessuk.co.uk has analyzed and described the most trendy ones.

7. P2P money lending

You can offer your extra cash to lend to individuals and businesses in exchange for above-average interest rate earnings (usually 3-6%). This kind of investment tends to be risky. If you use one of the matchmaking platforms like Seedrs, Funding Circle or Ratesetter, your money will be distributed across a few alternatives which are supposed to reduce the risk, however, the risk is still much higher than in case of a savings account. Please see Moneysavingexpert for more guidance.

The Bottom Line

ways of investing money UK

All of the above ideas rely on the principle that “Money makes money. And the money that makes money, makes more money” by Benjamin Franklin. There’s more beyond these most popular ways of investing money in the UK. See also our 5 great ideas on how to increase your income to read about other income sources. Take a step towards your dreams. Get closer every day.

Check out our blog for more resources on financial planning, passive income streams and life in general.

Posted: March 16, 2020