Is there a minimum amount to invest?

05 September 2022

Question by Nazneen

Is there a minimum amount to invest?

Answered by Carole Haswell

Hi Nazneen,

The simple answer to your question is ‘no’. You can invest any amount in anything at all that you think you might be able to sell for more money than you paid for it. However (there’s always a ‘however’…), if you are thinking of investing money in stock markets then there are one or two things to consider.

The first might seem obvious, but it’s a point worth making: the more you invest, the greater potential you have to benefit from any growth. So, 5% growth in a year on £100 means you have £5 more at the end of the year than at the start. Whereas 5% growth on £100,000 means you have £5,000 more. Of course, a similar principle applies for any falls in value – the more money you invest, the more you could lose if you need to sell your investments at a time when their prices in the stock markets have fallen.

The second thing to consider is that some providers offer products that do insist on a minimum amount. This might be a minimum initial deposit amount or a minimum monthly direct debit amount – or both. So, once you know which type of investment product is right for you and who you want to provide it for you, check to see if any minimum amounts apply before you go ahead. That said, many providers have very small minimum amounts such as £1 deposit and £25 a month.

Another really important consideration is what you are being charged to make the investment. If you are making modest investments, the best arrangement is one where the costs are worked out as a percentage of what you invest. You can expect his type of charging for the costs that go to the bods who do the actual investing (for example fund charges). However, sometimes the costs that go to the provider of the account where you hold your investments might be fixed – or flat rate. These would be shown as a number of pounds and pence per year or per month. If this is the case, think about what proportion of your investment is being eaten up by these costs. For example, if you are investing £100 and it costs a flat £4.50 to hold your account with the provider, this is a fair whack of your investment. But if you are investing £100,000, it’s not such a big deal.

Finally – and I am going beyond the remit of your question here – it’s worth saying a brief word about timeframes. Of far more importance than the minimum amount you might invest is the minimum amount of time that you leave your money invested. There are two good reasons for this:

• The longer the timeframe, the greater the effect of compound growth – in other words, leaving your investments to grow gives you the potential to get growth on your growth

• Being invested for a long time gives you a chance to build a cushion of growth that will soften the effect of a big fall in the markets – and a chance for values to recover after a fall

Studies done over periods of more than one hundred years have shown that, historically, your chances of being better off if you invest in stock markets rather than cash accounts increase with every year that you remain invested. As a general rule of thumb, it’s a good idea to only invest what you know you won’t need for at least 5-7 years. This might give the markets time to crash and recover before you have to sell your investments to get at your money – although there are, of course, no guarantees.

Hope this has been of some help. I wish you success in finding the right sort of investments for you.


Answered by

Carole Haswell

Financial Planner

I stumbled into the world of investing over 30 years ago armed with little more than a Modern Languages degree and a Post Office savings account. I have never forgotten how uncomfortable the jargon felt and how alienated I was by the assumptions made about what an investor looks like.