How to start investing with £100: a beginner's guide

​​​Why investing with a small amount makes sense

​Many people believe investing is only for the wealthy, but you can start with as little as £100.00. Digital platforms and fractional investing have democratised access to financial markets, making it possible for everyone to begin building wealth regardless of their starting capital.

​Starting small allows you to learn the fundamentals of investing without significant financial risk. Think of your first £100.00 as an educational investment – the knowledge and habits you develop now could potentially be worth far more than your initial capital in the long run.

​The power of compound growth means even modest regular investments can grow substantially over time. A £100.00 initial investment followed by small monthly contributions could potentially grow to a significant sum over decades, particularly when dividends are reinvested.

​Beginning with a manageable amount helps you develop the emotional resilience needed for long-term investing success. You'll experience market fluctuations on a small scale first, preparing you for larger investments in the future when you have more capital at stake.

Setting clear investment goals for your £100

​Before investing your first £100.00, define what you're trying to achieve. Are you saving for retirement, building an emergency fund, saving for a house deposit, or simply looking to grow your wealth? Your goal will shape your entire investment approach.

​Time horizon is perhaps the most critical factor to consider. If you're investing for a goal that's 10+ years away, you might consider shares or equity funds that historically offer higher long-term returns despite short-term volatility.

​Risk tolerance varies significantly between individuals and should inform your investment choices. Your £100.00 might be better placed in lower-risk investments if you're uncomfortable with the prospect of short-term losses, even if that means potentially lower returns over time.

​Be realistic about what £100.00 can achieve in the short term. While this sum won't generate life-changing returns immediately, it can be the foundation of a larger portfolio if you add to it consistently and give your investments time to grow through the power of compounding.

Choosing the right investment account for beginners

​A Stocks and Shares ISA should be a primary consideration for most UK beginners. This tax-efficient wrapper allows you to invest up to £20,000.00 annually (2024/25 tax year) without paying capital gains tax or income tax on your returns – potentially saving you significant sums as your investments grow.

​General Investment Accounts (GIAs) offer flexibility with no contribution limits but lack the tax advantages of ISAs. These accounts might be suitable if you've already used your ISA allowance or want to keep your initial £100.00 experiment separate from your tax-efficient savings.

​For those thinking about retirement, a Self-Invested Personal Pension (SIPP) offers tax relief on contributions, effectively giving your £100.00 an immediate boost. However, remember that money invested in a pension cannot be accessed until at least age 55 (rising to 57 by 2028).

​Consider opening an account with IG Invest, which offers a user-friendly mobile app experience designed specifically for UK investors. You can start with a small amount and access a wide range of investment options all in one place.

Investment options suitable for £100 starters

​Exchange-Traded Funds (ETFs) are often ideal for beginners with limited capital. These funds track indices like the FTSE 100 or S&P 500, providing instant diversification across dozens or hundreds of companies with a single purchase, reducing your risk compared to buying individual shares.

​Index funds work similarly to ETFs but are structured differently. They offer a low-cost way to track market performance and are particularly suitable for regular investing via direct debit once you've committed your initial £100.00.

​Fractional shares allow you to own portions of companies that might otherwise be out of reach with just £100.00. This innovation means you could own small stakes in several blue-chip companies rather than limiting yourself to only those with share prices below £100.00.

​Investment trusts are pooled investments run by professional managers that can be purchased through the share dealing platform. Some have been operating for over 100 years and offer diversified exposure to various markets, often with a focus on providing growing dividend income over time.

Understanding and managing investment risks

​All investments carry risk, including the possibility of losing money. With your £100.00, it's essential to understand that market values fluctuate, and short-term losses are part of the investment journey – particularly with growth-oriented investments like shares.

​Diversification is crucial even with a small amount like £100.00. Spreading your investment across different asset classes, geographical regions, and sectors helps reduce risk. This is why index funds and ETFs are often recommended for beginners with limited capital.

​Time in the market is generally more important than timing the market. Your £100.00 investment has a better chance of growing if you maintain a long-term perspective (5+ years), allowing you to ride out short-term market volatility rather than panic-selling during downturns.

​Emergency funds should take priority before investing. Ensure you have 3-6 months of essential expenses saved in an easily accessible account before committing your £100.00 to longer-term investments. This prevents having to sell investments at potentially unfavourable times if you need cash urgently.

Building sustainable investment habits beyond your first £100

​Consistency is the key to investment success. Consider setting up a monthly direct debit to add to your initial £100.00 – even £25.00-£50.00 per month can build into a substantial sum over time through the power of compound growth, where your returns generate further returns.

​Automating your investments removes the emotional element from the process. Regular, automatic contributions help you benefit from British pound-cost averaging, where you naturally buy more shares when prices are lower and fewer when prices are higher.

​Dividend reinvestment can significantly accelerate your portfolio growth. Rather than taking dividend payments as cash, reinvesting them purchases additional shares, creating a snowball effect where your investments generate more investments over time.

​Reviewing and rebalancing your portfolio periodically ensures it remains aligned with your goals. As you add to your initial £100.00 and as market movements change your investment allocations, occasional adjustments help maintain your desired risk level and investment strategy.

Common mistakes to avoid when starting with £100

​Expecting overnight success is perhaps the most common mistake new investors make. Your £100.00 investment should be viewed as the first step in a long-term journey – dramatic short-term returns are extremely rare and often come with excessive risk.

​Checking your investments too frequently can lead to emotional decision-making. With just £100.00 invested, daily price movements are largely irrelevant to your long-term success, and obsessing over them might tempt you into counterproductive trading behaviour.

​Following investment trends without understanding them is particularly risky with limited capital. Your £100.00 should be invested based on sound principles rather than chasing the latest investment fad or "hot tip" that could potentially lead to significant losses.

​Neglecting to increase your contributions over time limits the potential of your initial investment. While starting with £100.00 is commendable, gradually increasing your investment amounts as your financial situation improves will have a much greater impact on your long-term results.

How to get started investing your first £100

1. ​Do your research on different investment types and understand the level of risk you're comfortable with. Consider whether you prefer active or passive investing approaches based on your interest level and time commitment.
2. ​Choose whether you want to actively trade markets or take a longer-term investment approach. While trading offers potential short-term opportunities, long-term investing typically requires less time commitment and may be more suitable for beginners.
3. ​Open an account with IG Invest to access a wide range of investment options through our user-friendly mobile app, designed specifically for UK investors looking to build their portfolios.
4. ​Search for the investments you want to add to your portfolio, whether that's individual shares, ETFs, or other securities. Our platform offers research tools to help inform your decisions.
5. ​Place your first investment, starting with your £100.00, and consider setting up a regular investment plan to gradually build your portfolio over time through consistent contributions.