eToro: Buy Shares with 0% Commission

Your capital is at risk

How to Invest £500 UK – Best Investments Revealed

With the recent explosion of Gamestop, more and more people are becoming aware of investing money online to earn a return. Online investing has become more accessible than ever; whether it’s stocks, bonds, or other assets, the ability to invest your cash and generate a profit is becoming increasingly popular. But where should you start?

This guide will explain how to invest £500 UK in the most efficient and practical manner. We’ll touch on various aspects of the investing process, such as choosing the right asset and determining which broker to use so that you can make the most informed decisions. By the end of this post, you’ll have all the tools you need to begin investing today!

How to Invest £500 UK – Best Investments 2021

Deciding how best to invest £500 UK can be difficult. The list below highlights ten of the best investments to consider in 2021. We will discuss each investment in more detail in the following section.

  1. S&P 500 Index – Best Way to Invest £500 in 2021 – Invest Now
  2. FTSE 100 Index – Best Way to Gain Exposure to the UK Stock Market – Invest Now
  3. Gold – Best Investment for Hedging Against Market Shocks – Invest Now
  4. Bitcoin – Best Cryptocurrency Investment in 2021
  5. Tech Sector – Best Method for Generating Above Average Returns
  6. ISA – Invest Money and Earn a Tax-Free Return
  7. Apple – Best Tech Stock to invest £500 in
  8. JD Sports Fashion PLC – Trending Retail Stock with 20.49% ROI
  9. Scottish Mortgage Investment Trust – One of the Largest UK Trusts With High Revenues
  10. Ethereum (ETH) – Best Altcoin to buy now before the rollout of Ethereum 2.0

Best Ways to Invest £500 UK

The above list highlights ten different ways that you can invest £500 in the UK. This list offers various investment types, from short-term to long-term, across the entire range of the risk/reward spectrum.

Each investment ultimately depends on personal preference. If you are the type of person that prefers a more passive and safe approach, check out an ISA or a government bond. If you are more risk-seeking and like the idea of larger returns, then perhaps an individual stock or a tech ETF broker is best for you.

In the following paragraphs, we delve deeper into each of these potential investments, helping you decide how to invest £500 UK.

1. S&P 500 Index – Best Way to Invest £500 in 2021

When people ask what is the best way to invest £500, the S&P 500 index invariably gets mentioned. S&P 500 index funds are one of the most popular methods to earn a passive income. Many financial advisers recommend that index funds such as these are included in your investment portfolio, as they help compensate for fluctuations in other assets. They work by tracking the performance and movements of the S&P 500 index, which is one of the best representations of the US stock market as a whole.

sp500 index invest £500

One of the best reasons for investing in an S&P 500 index fund is due to the instant portfolio diversification that it provides. When you place £500 into a fund like this, you essentially buy shares of 500 companies operating in a large number of sectors. This means that if a few of the companies experience a downturn, the chances are that some of the other ones will experience an upturn, negating any losses you may have sustained.

Since its inception, the S&P 500 index has been known to showcase consistent positive annual returns, making an average annualised return of 10%. Thus, investing in one of these index funds provides a good chance of generating a passive income.

Key Points on S&P 500 Index:

  • Great for portfolio diversification
  • Investors holding the S&P 500 index try to match the performance of the index
  • Investing in an index fund is ideal for traders with low risk tolerance thresholds
  • S&P 500 index has a strong track record for withstanding market volatility in the long run
Type of Investment Best for Price to invest with eToro
Index CFD Long term returns Typical spread of 0.75 points

67% of retail investor accounts lose money when trading CFDs with this provider.

2. FTSE 100 Index – Best Way to Gain Exposure to the UK Stock Market

Another method of how to invest £500 is in the FTSE 100 index. Much like the S&P 500, the FTSE index provides a good representation of the UK stock market. Comprising of the 100 firms listed on the London Stock Exchange with the highest market capitalisation, the FTSE is another very popular method to gain exposure to the stock market.

ftse100 index how to invest £500

Much like the S&P 500, the FTSE 100 is known for generating positive yearly returns consistently. Over the past 25 years, the index has produced an average annualised return of 6.47%.

If you are interested in passive investing and want to gain exposure to both the UK and US markets, you could create a portfolio of both these index funds with your £500. You could then weigh it however you want; for example, £300 in the S&P 500 and £200 in the FTSE 100, so you gain a little more exposure to US equities.

Key Points on FTSE 100 Index:

  • If you’re looking for a good long-term investment the FTSE 100 could be a great option.
  • The stock market is currently riding a bearish wave, meaning it could provide positive returns in the long term
  • CFD instruments are speculative and allow you to go either long or short
  • Gain exposure to the UK 100 index without taking ownership of the underlying assets
Type of Investment Best for Price to invest with eToro
Index CFD Long term returns 0% commission, typical spread of 1.5 points

67% of retail investor accounts lose money when trading CFDs with this provider.

3. Gold – Best Investment for Hedging Against Market Shocks

Gold is one of the most trusted assets globally, having been used as a store of value since ancient times. In the 1800s, many nations adopted what is known as the ‘Gold Standard’, which meant fixing the price of their currency to the cost of gold. Most countries abolished this in the late 20th century, but it highlights the importance that nations place on the commodity.

invest in gold uk

These days, gold could be a great place to invest £500 if you would like to hedge against market shocks. Exchange rates rarely influence the price of gold, and its price often appreciates alongside inflation rates. Also, in times of worry (such as the Coronavirus pandemic), people often flock to gold as a value holder, further boosting its price.

An excellent way to invest in gold is through a CFD. This saves you from buying the physical gold (by buying coins or gold bars) and all the hassle that would accompany storing it. Gold CFDs are offered by both eToro and Libertex.

Key Points on gold:

  • Gold is regarded as a safe-haven investment
  • This commodity has a resilience to devaluation
  • It has always been in demand 
  • It offers a great way to hedge against market volatility 
Type of Investment Best for Price to invest with eToro
Commodity CFD Short term and Long term returns Typical spread of 45 pips

67% of retail investor accounts lose money when trading CFDs with this provider.

4. Bitcoin – Best Cryptocurrency Investment in 2021

Everyone has heard of Bitcoin. Over the past decade, the cryptocurrency has skyrocketed in price, leading many people to experience over 1000% returns from when they first purchased it.

invest in bitcoin uk how to invest £500 uk

Bitcoin is popular due to the enormous returns that investors have experienced; however, it is incredibly volatile. It is not uncommon to see prices swing by 20% in each direction on a particular day, meaning investing in this cryptocurrency is not for the faint-hearted.

eToro allows you to trade Bitcoin from the comfort of your own home. Simply open an investment account, make a deposit, and you’re ready to go. You can invest as little as $25 in Bitcoin, meaning you gain some exposure without breaking the bank. This is one of the best investment strategies for beginners, as it’s a hands-off approach meaning you’ll spend less time researching the markets and more time trading assets passively.

Key Points on Bitcoin:

  • Largest cryptocurrency with a market cap of $786 billion
  • BTC has a 24-hour trading volume of $31.3B
  • Bitcoin ROI exceeds 30,000%
  • Bitcoin’s key advantage is that it was the first cryptocurrency to appear on the market
Type of Investment Best for Price to invest with eToro
Cryptocurrency Long term returns 0% commission, typical spread of 0.75%

67% of retail investor accounts lose money when trading CFDs with this provider.

5. Tech Sector – Best Method for Generating Above Average Returns

As technological innovation accelerates and more companies become aware of the need for digital processes, tech companies are poised to continue their growth and increase their market share. The tech sector is the largest industry in the US, holding over 25% of the entire market.

invest in tech stocks etoro invest £500

Many people invest in the tech sector, either directly or through Exchange Traded Funds (ETF), to generate a positive return. This sector includes large companies such as Apple, Netflix, Facebook and more, meaning there is a good possibility that investments in this sector could make a profit.

A fantastic way to invest £500 UK in the tech sector is through eToro’s BigTech copy portfolio. This feature requires a minimum deposit of $5,000. Still, it will enable you to gain exposure to 25 of the world’s leading tech companies, giving you a solid chance of generating a passive return.

Key Points the tech sector:

  • CopyPortfolios allow you to invest in a basket of assets passively
  • Tech sector is one of the most robust industries across the board
  • The tech sector is the largest industry in the US, holding over 25% of the entire market.
  • Gain exposure to FAANG stocks without taking ownership of the underlying assets
Type of Investment Best for Price to invest with eToro
CFD portfolio – CopyPortfolio Long term returns 0% commission, minimum deposit of $5,000

67% of retail investor accounts lose money when trading CFDs with this provider.

6. ISA – Invest Money and Earn a Tax-Free Return

If you’re looking for the best way to invest £500 per month, utilising an ISA could be your best bet. ISA stands for Individual Savings Account, and many retail banks offer these types of investment accounts. A lot of people place a lump sum into an ISA and leave it over the long term. The good thing about an ISA is that your return is pretty much guaranteed, although rates are historically low.

best uk isa

People say that ISAs are the best way to invest £500 per month because any interest you make is not subject to income tax. So if you invested a lump sum of £500 at the start of the year, at an interest rate on the ISA of 2%, you would receive £10 in profit. Again, a lot of people will think this is a meagre return, and it is – however, it is compensated by the fact that the return is basically guaranteed.

There are many companies that offer ISAs, such as Vanguard and other retail banks. Also, as a disclaimer, there is a legal cap on the amount you can invest in an ISA each year; this is known as the ISA allowance and is usually £20,000 annually. Finally, before investing in an ISA, make sure you get the best rate available; due to the returns being low, you want to ensure you take heed of financial advice and maximise your profit potential.

Key Points on ISAs:

  • You don’t pay tax on dividends from shares
  • ISA accounts are exempt from capital gains tax
  • There is no tax to pay on interest you earn in an ISA
  • You don’t have to declare ISAs on your yearly tax return
Type of Investment Best for Price to invest with eToro
ISA account Long term returns N/A 

67% of retail investor accounts lose money when trading CFDs with this provider.

7. Apple – Best Tech Stock to invest £500 in

If you are happy to take on more risk and accept the fact that there is potential to lose your money, it could be worth investing in the stock market. There are so many options to choose from, but, as mentioned earlier, the tech sector is one of the fastest-growing and most profitable industry investors. Within this sector, there are thousands of investment opportunities, but Apple stands ahead of the pack.

invest in apple uk

The recent release of the 5G-enabled iPhone 12 led to a boost in revenues for Apple – they now have over 1.6 billion devices in use worldwide. Furthermore, Apple’s sheer brand power means that any products they bring out are sure to be a hit. With rumours of an Apple Car in the works, there is good reason to invest £500 in the stock. With their stock up 167% from the previous year, it might be worth considering Apple for your investment portfolio.

Key Points on Apple:

  • Large market cap of $2.40 Trillion
  • Warren Buffet owns 5% of the tech giant
  • In 2020, Apple reported total revenue of $111 billion with 59% coming from iPhone sales
  • Dividend payout rose by 7% in 2021 to $0.22 per share
Type of Investment Best for Price to invest with eToro
Stock Long term returns 0% commission on stocks

67% of retail investor accounts lose money when trading CFDs with this provider.

8. JD Sports Fashion PLC – Trending Retail Stock with 20.49% ROI

Finding the best shares to buy right now can be a challenge. Nevertheless, by looking at the recent share performance you can gauge which shares are more resilient than others. If a business has reported significant growth in the last couple of months, you can be sure that it bodes well. Furthermore, at the end of Q3 2021 we witnessed a bear market in the FTSE 100 index forcing investors around the world to reevaluate and adjust their portfolios. 

How to invest £500 - JD shares

JD Sports Fashion PLC (LSE: JD) shares rose by more than 20% since July, and 40% when compared to the same period last year. This diversified retailer has a presence in more than 2,000 locations worldwide. Even though the UK accounts for more than 40% of group revenue, the retailer is well diversified with revenue contributions from other countries including the United States. 

The potential risks associated with buying JD shares now are related to possible supply chain disruptions due to the recent fuel crisis. The shortage of HGV drivers and the panic-buying queues at petrol stations around the UK could prove to be a big hurdle for the company to overcome. 

For the fiscal year that ended on the 31st January 2021, JD’s revenues rose by 0.92% and amounted to £6.17 billion, according to eToro.  

Key Points on JD Sports:

  • JD shares are up 20% since June
  • UK market accounts for 40% of group revenue
  • For the fiscal year ended 31/1/21 revenues increased by 0.92%
  • Net assets increased by 16.07% to 1.50B.
Type of Investment Best for Price to invest with eToro
Stock Short term returns 0% commission on stocks

67% of retail investor accounts lose money when trading CFDs with this provider.

9. Scottish Mortgage Investment Trust – One of the Largest UK Trusts With Strong Revenues

If you’re still wondering how to invest £500, the Scottish Mortgage Investment Trust (LSE: SMT) is another one of the best shares to buy right now. For the fiscal year that ended 31st March 2021, the Trust’s net revenues soared by a whopping 786.25%, and its net income increased by just under 850% to £9.21 billion. The shares increased by over 10% in the last three months and 51% YTD. 

How to invest £500 - SMT

This investment trust has a diversified portfolio of stocks that it invests in. Some of the companies that make up the top ten holdings are Tesla, Moderna, and NIO. One of the main reasons why many investors are adding the Scottish Mortgage Investment Trust to their watchlists is down to how the trust is managed. 

The trust is run by expert wealth managers with a strong track record. The markets are likely to be hard to navigate during the winter months, so investing some of your funds in this stock should act as a hedge against acute bouts of volatility and bearish sentiments. 

Some market analysts have pointed out that US stock markets are currently overvalued, meaning there could be a potential sell-off during the winter. This is something to keep in mind since US-listed stocks account for 37% of the trust’s total holdings. 

Key Points on Scottish Mortgage Investment Trust:

  • One of the largest investment trusts in the UK
  • Is a constituent of the FTSE 100 index
  • For the fiscal year ended 31/3/21 revenues increased by 786.25%
  • Net income increased by 846.88% to 9.21B.
  • Diversified portfolio of companies including Moderna, Tesla, and NIO. 
Type of Investment Best for Price to invest with eToro
Stock Long term returns 0% commission on stocks

67% of retail investor accounts lose money when trading CFDs with this provider.

10. Ethereum (ETH) – Best Altcoin to buy now before the rollout of Ethereum 2.0

After making it through some rough periods, Ether (ETH) has staged a strong rally. Its market price dropped below $1,800 as recently as mid-July. But at the time of writing, it’s trading around the $2,890 mark representing a 60.72% increase. Ethereum’s all-time high was recorded on May 12th 2021 when it reached $4,362.35. So what is fueling Ethereum’s recent gains?

In terms of market cap and market dominance, Ethereum is the second-largest cryptocurrency in existence. Launched back in 2015, it was trading for $0.4209 and has come on leaps and bounds since then. Unlike its competitors, Ethereum was one of the first digital assets that developers could use to create decentralized apps, commonly referred to as dApps. These dApps are used with NFTs (non-fungible tokens) which have gained traction in recent months. 

How to invest £500 in ETH with eToro

Since Ethereum was the programmable blockchain with flexible uses, around 80% of all dApps now run on the Ethereum blockchain. Ethereum 2.0 is also set to roll out soon with upgrades promising greater scalability and faster transaction processing speeds. The second version also poses to enhance security and have less of an impact on the environment. Considering how much scrutiny Bitcoin has received for its energy consumption, Ethereum 2.0 is a welcome development that could help propel it to the number one spot on the crypto market. 

The crypto market is incredibly volatile at the best of times, making timing the market almost impossible. If you’re looking to buy ETH as a long-term investment, many traders are sticking to the HODL tactic. Ethereum has a lot of strong qualities, with many market analysts forecasting widespread adoption of its blockchain technology. 

Key Points on Ethereum:

  • Second-largest cryptocurrency with a market cap of $344 billion
  • ETH has a 24-hour trading volume of $17.9B
  • Ethereum 2.0 scheduled to be introduced by Q4 2021
  • Ethereum blockchain is used for dApps
  • Has the potential to replace Bitcoin
Type of Investment Best for Price to invest with eToro
Cryptocurrency Long term returns 0% commission, typical spread of 1.90%

67% of retail investor accounts lose money when trading CFDs with this provider.

How to Choose Smart £500 Investments

As mentioned, there are so many different ways to invest £500 in the UK that it could seem overwhelming. Thus, it is critical to determine the factors that you will evaluate before making any investment decision. These factors will ultimately come down to personal preference, but this guide will detail three of the most important below, giving you the information you need to conduct your investment analysis.

Risk

One of the most important things you should evaluate before making any investment is its risk. When thinking about how to invest £500 UK, it is imperative that you analyse what your potential losses could be and how these relate to your risk/reward tolerance.

etoro cryptocurrency

Different assets have different risk levels; for example, cryptocurrency is inherently riskier than a government bond due to its volatile nature. However, on the flip side, the potential for returns by investing in crypto is astronomically higher than if you were to invest in bonds. So, again, make sure the asset(s) that you decide to invest £500 in are suitable for you.

Potential returns

The second thing you should consider is the potential returns you could make by investing in a particular asset. As mentioned, cryptocurrency returns would be far higher than those generated by bonds, yet this is accompanied by a much larger degree of risk.

One thing you should consider is the potential for compound returns. This refers to the passive return you generate monthly or yearly by steadily compounding your investment; you essentially earn a return on your return.

An example of this could be if you invested £500 in the FTSE 100 index. If the index generated a return of 10% that year, you would make a profit of £10, giving you a total of £110. However, if the FTSE 100 index again generated a 10% return in year two, you’d make a profit of £11 this time, giving you a total of £121. Over a more extended period, this can turn into a snowball effect and exponentially increase your money.

Diversification

The third thing you should consider is how well diversified your investments are when investing £500 in the UK. This ties into the element of risk and refers to the correlation between the securities you hold. For example, if you invested the whole £500 in one stock, if that stock crashed, you would lose a lot (if not all) of your money as you are not diversified at all.

If, however, you invested £250 in that stock and then another £250 in a stock that operates in a different sector, this would gain you a level of diversification. If these stocks are negatively correlated, it means that if one goes down, then the other would go up, offsetting any risk you may have incurred. With large portfolios, this diversification increases significantly, which in turn will decrease the level of risk.

Best Brokers to Invest £500 UK

etoro fca

Now that we have discussed various potential investments for your £500, it’s time to focus on how exactly to make your chosen investment. You will need an online stock broker to allow you to invest £500 in the UK – this broker acts as a middleman and will facilitate the transaction for you.

There are many different brokers out there, each with its features and selling points. However, it’s vital to check they are regulated by the FCA and partnered with the FSCS to ensure you have a level of protection.

Found below are two of the best brokers in the UK to use when investing £500 online.

1.   eToro – Best UK Broker to Invest £500 – 0% Commission

etoro logo

Throughout this how-to invest £500 UK guide, we have mentioned eToro, which is down to them being our favoured broker for investing in the UK. eToro is an FCA-regulated broker and has partnered with the FSCS, which protects your deposit up to a total of £85,000.

eToro has recently surpassed 20 million users worldwide, which is an incredible achievement, given they have only been in operation for just over 13 years. They hold a vast range of potential assets, including stocks, bonds, ETFs, Cryptocurrencies, FX, and more. The only investment in the list mentioned earlier that eToro does not offer is an ISA – every other investment can be traded easily using eToro’s platform. This leading social trading platform is ideal for beginner traders looking for different types of investments, without spending large amounts of money.

One of the best things about eToro is its fee structure. They charge zero commission on your trades, meaning you get to keep more of the profit than you would with other brokers. Also, eToro does not charge a monthly account fee, a deposit fee, or a withdrawal fee.

etoro portfolio

Another great benefit of using eToro is the fact that they offer fractional ownership. This means you can buy fractions of shares, rather than having to buy a whole share. Fractional shares are beneficial for more expensive stocks, such as Apple; if their stock was priced at $120, you could essentially buy half of a share if you didn’t want to purchase the full thing.

Finally, eToro offers a CopyTrader feature which allows you to view and automatically copy what other traders are doing. This is similar to a robo-advisor in that they’re both passive investment strategies. This is a fantastic feature for beginner traders, as it will enable them to copy the trades that more experienced traders are making, increasing their profit potential.

All you need to do to get started with eToro is sign up using their quick and easy account opening process. Once this is done, simply deposit into your account, and you’re ready to begin investing.

Pros

  • 0% commission brokerage firm
  • No stamp duty tax on UK shares
  • Over 2,400 global shares and 250 ETFs
  • CFD markets also offered
  • Social network with copy trading
  • Regulated by the FCA
  • FSCS partnered
  • Initial investment required is just $50
  • Wide range of supported payment methods including credit cards, wire transfers and e-wallets.

Cons

  • Withdrawal and inactivity fees
  • Does not offer mutual funds
  • Lack of Roth IRA, and retirement accounts

67% of retail investor accounts lose money when trading CFDs with this provider.

2.   Libertex – Invest £500 in CFDs with Tight Spread and Leverage

libertex logo

Our second favourite broker is Libertex. Founded in 1997, Libertex has more than 20 years of financial market and online trading experience. Also, Libertex has approximately 2.2 million users, hailing from over 170 countries worldwide.

Notably, Libertex is a CFD broker and stock app; this means that you will not own the actual security when you trade with them. Instead, you will own a contract based on the price of the underlying asset. This contract pays out the difference between what you open your position at and what you close at. CFDs are a great way to speculate on the price of a stock, ETF, cryptocurrency, bond, or any other financial instrument.

libertex investments

In terms of their CFD range, Libertex offers many different securities that you can invest £500 in. These include stocks, forex, metals (such as gold), ETFs, and more. With Libertex, you are sure to find a CFD that interests you.

A central selling point for Libertex is that they do not charge a spread on their CFD offerings. This spread refers to the difference in price that Libertex buy and sell at; brokers will charge a lower price to repurchase an asset of you than they would sell that same asset. This difference in offered prices is called the spread and is how many brokers make their money.

As Libertex offers tight spread investing, this can save you money when investing, particularly if you are trading actively. However, Libertex does charge a commission when placing an order; this commission can vary depending on the security, so make sure to double-check before making a trade.

Finally, opening an account at Libertex is simple and can be completed online. They require a minimum deposit of €100; users can do this through various methods, such as bank transfer or credit/debit card. They do not charge any deposit or withdrawal fees, and as soon as your account is funded, you are free to invest in the CFDs that Libertex offers.

Pros:

  • Tight spread CFD trading
  • Very competitive commissions
  • Good educational resources
  • Low-cost trading
  • Long established broker
  • Trade stocks and indices like the Dow Jones
  • Compatible with MT4
  • Great choice of markets

Cons:

  • Only offers CFDs

74% of retail investors lose money trading CFDs with this provider.

Conclusion

To wrap up, this guide has covered everything you need to know about how to invest £500 UK. We have discussed a wide variety of investments, ranging from individual stocks to ETFs, to provide a comprehensive overview of your potential low-cost options.

Although we have offered many suggestions throughout this guide, the final decision ultimately rests with you. You must take into consideration your risk tolerance, along with the level of returns you would ideally like to make. Having these two factors determined beforehand can ensure your chosen investment is right for you.

And lastly, if you want to invest £500 from home, you’ll need a reliable broker regulated by the FCA. Our favourite broker is eToro; they offer thousands of potential investment options, all of which can be traded completely commission-free!

eToro – Best Broker to Invest £500 UK – 0% commission

67% of retail investor accounts lose money when trading CFDs with this provider.

FAQs

Where to invest £500 per month?

What can I invest £500 in?

Should I invest £500 in cryptocurrency?

Can I invest £500 risk-free?

How do I double my £500 investment fast?

About Connor Brooke PRO INVESTOR

Connor is a Scottish financial expert, specialising in wealth management and equity investing. Based in Glasgow, Connor writes full-time for a wide selection of financial websites, whilst also providing startup consulting to small businesses. Holding a Bachelor’s degree in Finance, and a Master’s degree in Investment Fund Management, Connor has extensive knowledge in the investing space, and has also written two theses on mutual funds and the UK market.

Read next