Are you wondering where you can invest a low amount of money in the UK? When money is rarer than rocking horse dung, DIY investing can feel like the sport of kings – something akin to international polo, yacht racing, or panda wrestling.

Read on to discover your best options for investing £25 per month or less using budget-friendly brokers. 

Disclosure: Links to platforms may be affiliate links, where we may earn a small commission. It doesn’t affect the price you pay nor how we judge the brokers.

What’s the lowest amount of money you need to invest?

You can invest in a portfolio of ETFs from just £10 a month with InvestEngine

InvestEngine’s big attraction is that your money won’t be molested by the gang of brokerage fees that usually lie in wait for unsuspecting investors. 

There are no platform charges, trading costs, or FX fees to worry about – just so long as you stick to the DIY investment service. 

Brilliantly, you can also activate the AutoInvest feature. This will automatically spread your money between your chosen ETFs in line with your asset allocation.

AutoInvest enables you to build a highly-diversified investment portfolio for a tenner using InvestEngine’s Savings Plan.

Note, the plan uses Variable Recurring Payments to tickle your bank when the money’s due. 

If your account doesn’t support open banking then you can set up a Direct Debit instead. 

In that case, the lowest amount of money you can invest with InvestEngine is £50 per month. 

There are a couple of other snags to watch out for. 

Firstly, InvestEngine doesn’t offer a SIPP account yet. SIPPs are pension accounts that typically beat a stocks and shares ISA as the best place to save for your retirement. 

Also note that a £10 a month contribution split between multiple ETFs is likely to involve purchasing fractional shares. This may lead to problems further down the line with ISA accounts. (We will attack this can of worms with our investigative tin-opener in a moment). 

Our next option avoids all that palaver…

Where to invest a low amount of money into a SIPP and/or mutual funds

Fidelity offers the best deal if you want to invest a small amount into a SIPP or use mutual funds (which heads off the fractional share dilemma). 

Fidelity’s Monthly Savings Plan enables you to invest a minimum of:

 £20 per month into a SIPP (you should get £5 tax-relief on top, too)
 £25 into a stocks and shares ISA or General Investment Account (GIA)

Fidelity’s platform fee is 0.35%. That’ll cost you £3.50 per year for every £1,000 invested. You can avoid trading costs by sticking to funds instead of ETFs or shares.

The minimum investment amounts above apply per fund, per month. 

So you’d need to invest £40 to £50 monthly in a two-fund portfolio. 

Happily, you can diversify in a one-er by investing in a multi-asset fund like Vanguard LifeStrategy.

Multi-asset funds bundle up multiple asset classes into a single package. This makes them an ideal way to invest a low amount of money. 

Where to invest a low amount of money into a LISA

Dodl by AJ Bell allows you to invest from £25 per month into a Lifetime ISA (also known as a LISA). 

You’ll pay a 0.15% platform fee with a minimum charge of £12 per account, no matter how small your portfolio’s balance. 

Dodl’s combo of low platform charge, flat-fee baseline, and zero trading costs means it beats Fidelity once your investments are worth more than £3,428 in a standard ISA or GIA. 

Dodl’s downside is its limited range of funds and ETFs, and the lack of a SIPP account. 

Other minimum investment options

Technically, Trading 212 is the place to go to invest the lowest amount of money required by any UK broker. 

It will let you stake £1 a throw with zero trading fees and no platform charges to boot. You can invest in ETFs with Trading 212, even though the emphasis is on shares and more exotic instruments. 

That said, we believe most investors are better off with a passive investing strategy built around index funds and ETFs. This is the best way by far to diversify your portfolio on a budget. 

Freetrade’s minimum trade is £2 a pop. Stick to its GIA though. Both the ISA and SIPP accounts come with sizeable annual costs attached. 

Finally, Wombat lets you invest from £10 per month. The money marsupial is even cheaper than Dodl (0.1% vs 0.15% platform fee), and also beats Fidelity when your portfolio is valued over £3,428. 

The drawback is a product range smaller than a celeb chef’s set menu. And no SIPP. 

Wherever you choose to invest, you can check out the fees for all the major UK investment platforms on our broker comparison table. 

Look out for a broker’s ‘regular investing’ option to take advantage of its minimum investment amount.

You’ll typically have to pony up more to invest occasional lump sums.

Trading 212 and Freetrade are notable exceptions. You can invest tiny ad hoc amounts with them, without committing to a monthly schedule. 

Fractional shares snag

When investing low amounts of money in the UK, watch out for the share price of your chosen vehicle. 

You won’t be able to buy in if the cost of a single share is higher than your contribution. Not unless your platform allows fractional investing. 

Fractional investing is always available for mutual funds. That makes them much simpler to trade if you’re on a budget. 

But only a handful investment platforms offer fractional shares for individual stocks. 

And InvestEngine is the only UK broker we know of that offers ETF fractional investing. 

Happily, there are so many ETFs on the market, you’ll often be able to find a low share price option even if you’re investing £25 a month or less. (A low share price ETF is not worth less than a high share price equivalent. Don’t worry about that at all.)

Less happily, if you go down the fractional share route you should know HMRC has recently cast doubt about whether this is permissible within an ISA account. 

Fractional shares in an ISA SNAFU

HMRC has stated that fractional shares are not eligible ISA investments. 

The announcement came as a big surprise to the brokers that have been merrily offering fractional shares in ISAs – and continue to do so. 

Indeed, those platforms are sticking to their guns so far. Some are even threatening HMRC with lawyers at dawn if the taxman cracks down. 

To cut a tedious story short: the ISA vs fractional shares situation is far from resolved.

If HMRC pursues the matter then you could be liable for a capital gains and dividend income tax bill. 

True, you’d have to earn over £1,000 in dividends per tax year before you owned a penny thanks to the dividend allowance.1

Similarly, you’d have to make over £6,000 in capital gains in 2023-24 – or over £3,000 from the tax year 2024-25 – before you’re likely to get mixed up in any costly fractional share repercussions. 

In other words, you’ve got plenty of tax allowance headroom if you’re buying fractional shares for the amounts we’ve been discussing in this article. 

But we flag the problem now because your investment contributions are likely to snowball as you progress through your career. 

Thankfully this ISA imbroglio does not apply to fractional investing in mutual funds. That’s because they offer fractional units and not shares.

Makes total sense, doesn’t it? 

The Pound Stretcher portfolio

Turning, then, to funds, if you’re wondering where to invest a low amount of money in terms of funds or ETFs then the simplest solution is to choose a Vanguard LifeStrategy fund. 

Because Vanguard LifeStrategy is a mutual fund, you won’t incur trading costs with any of our broker picks above. You can also invest in fractional units without any HMRC entanglements. 

As for ETFs, multi-asset ETFs are a rare beast in the UK, although BlackRock offers an ESG range

However my ETF preference would be to DIY diversify with a brace of index trackers that could sit at the heart of any portfolio:

ETF 1: 60% Global equity

For example: L&G Global Equity ETF (LGGG), OCF 0.1%.
A diversified, large- and mid-cap index tracker that represents a broad slice of the developed world equity market and can be expected to provide growth over the long term.

ETF 2: 40% UK Gilts

For example: iShares Core UK Gilts (IGLT), OCF 0.07%.
An intermediate UK government bond index tracker that should reduce portfolio volatility over time and diversifies against the threat of a stock market crash.  

I’ve chosen this pair of bargain basement beauties because they balance a keen Ongoing Fund Charge (OCF) with a low share price. 

But we have written about other low-cost index funds and ETFs too. 

Risk versus reward for newbies

The classic 60/40 asset allocation mix I’ve suggested above is for illustration purposes only.

If you’re just starting out, are relatively young, and have a strong risk tolerance (or are teaching the kids about investing) then you could consider a 100% equities portfolio using the global ETF only. 

Beware: an equity-only portfolio will be a much wilder proposition without the calming effect of partnering it with government bonds. 

But you may find such volatility easier to stomach when you’ve only relatively small amounts of money at stake, and plenty of years ahead to make good any losses. 

You don’t? Diversify your portfolio with a large slug of bonds if 100% equities proves too stressful. 

See our investment portfolio examples for a deeper dive into asset allocation. 

From small acorns

The power of compound interest makes it worth your while to start investing sooner rather than later, even when cash is tight.

Plus, you’ll bed in good habits, learn about portfolio management, and make your mistakes while you have less skin in the game. 

All that said, while it’s worth knowing where to invest a low amount of money in the UK, you’ll achieve your objectives faster by saving and investing more. 

But that can wait until you’re good and ready. Just get started!

Take it steady,

The Accumulator

Though the allowance reduces to £500 from April 2024.

The post Where to invest a low amount of money UK  appeared first on Monevator.

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