Best Small Investments UK to Watch
In this guide, we explore some popular small investments in the UK. Each and every financial asset that we discuss can be purchased online at a regulated brokerage site with an upfront investment.
10 Small Investments for 2022
Check out the list below to see 10 popular small investments based on trading volumes:
- Mutual Funds
- Index Funds
- iShares Core US REIT
- UK Savings Accounts
- Vanguard Total Bond Market ETF
- iShares Treasury 20+ Year Index
1. Stock Markets
The London Stock Exchange – which is home to some of the UK’s biggest companies. Think along the lines of British American Tobacco, HSBC, BP, BT, and GlaxoSmithKline. You also have the Alternative Investment Market (AIM), which is the UK’s secondary exchange. This includes smaller companies or those that are yet to establish themselves.
Outside of the UK, there are dozens of markets that you can access from the comfort of your home. In particular, this includes the two major markets found in the US – the NASDAQ and New York Stock Exchange. This covers companies such as Apple, Amazon, Facebook, Disney, Nike, Twitter, and Coca Cola.
Now, irrespective of which stock exchange you wish to target, shares can be purchased on a fractional basis.
Even if you’re new to the online investment scene, you have likely come across the term ‘diversification’. In a nutshell, this refers to the process of building an investment portfolio that contains heaps of different assets. Not only this, but your chosen assets must cover a variety of markets, economies, and risks.
The main objective of the ETF is to track a specific area of the financial markets.
This might include:
- Blue-chip stocks
- Dividend stocks
- Emering market stocks
- Emerging market bonds
- Corporate bonds
- Government bonds
- Commodities like gold and silver
- Index funds (see the below)
3. Mutual Funds
Mutual fund providers have access to vast resources. This ensures that it has the financial means to access any market of its choosing.
In terms of choosing a mutual fund to invest in, this is the only part of the process that requires an element of research. After all, there are hundreds of mutual funds active in the space – many of which can be accessed from the UK online.
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4. Index Funds
The FTSE 100 is the UK’s primary index as it tracks the largest 100 companies listed on the London Stock Exchange. Then you have the likes of the Dow Jones, which tracks 30 large-cap companies in the US from a variety of sectors.
The S&P 500is the world’s largest stock index. It contains 500 large US companies and it is a way to gauge the strength of the wider American economy. Since this index was officially launched way back in 1926, it has returned average gains of 10% per year.
For example, the S&P 500 started the year at 3,257 points. As per the wider impact of COV-19, the index hit lows of 2,237 points in March.
This is in stark contrast to the FTSE 100 which is still valued well below pre-pandemic levels. In fact, the FTSE is 23% down as of early November 2020.
5. iShares Core U.S. REIT
Real estate investment trusts (REIT) are financial products offered by large-scale institutions. The provider in question will pool investor funds together to purchase properties. The REIT will specialize in a particular area of the real estates space – such as commercial, residential, retail, or healthcare.
Either way, you can access this market by making small investments into a REIT ETF online.
In terms of researching a REIT to make small investments, there are many options on the table. With that said, one popular REIT in the market right now is that of the iShares Core U.S. REIT ETF. This gives you the opportunity to invest in the US housing market from the UK.
Some of the main holdings found in the iShares Core U.S. REIT ETF are as follows:
- PROLOGIS REIT INC
- EQUINIX REIT INC
- DIGITAL REALTY TRUST REIT INC
- PUBLIC STORAGE REIT
- WELLTOWER INC
- REALTY INCOME REIT CORP
- AVALONBAY COMMUNITIES REIT INC
- ALEXANDRIA REAL ESTATE EQUITIES RE
- SIMON PROPERTY GROUP REIT INC
At the time of writing, there are a number of exciting new crypto projects that could prove to be excellent investments. In particular, the Chimpzee project is a great new crypto token to watch. The project has recently launched a presale event during which invest can purchase tokens for a very low price and it is selling out quickly.
Chimpzee is appealing because it is a sustainable crypto that will donate a portion of all profits to environmental charities. Furthermore, the platform will provide users with 4 different ways to earn passive income and generate real value for their initial investment.
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The US eclectic car marker has defied the realms of possibility in 2020 – with the value of its stocks increasing by 400%. Not only is this uncanny when you think of the sheer decline in consumer demand for cars this year, but Tesla’s primary US plant closed for several months during the wider lockdown measures.
Even more interesting is that the stock is now trading at a staggering price-to-earnings ratio of over 804 times. Taking all of this into account, Tesla is now the largest car market globally – outpacing established players like Ford and Toyota by some distance. We should also note that Tesla recently initiated its first-ever stock split at an offering of 5-for-1.
8. UK Savings Accounts
Savings accounts allow you to invest really small amounts.
This means that you can inject a few pounds here and there with the view of building a pot over the course of time. However, the amount of money that you will be able to earn from a savings account investment is minute. In fact, you will be lucky to get more than the current rate of UK inflation.
You then have the likes of Natwest and RBC – which both claim to offer accounts that pay a very generous interest rate of 3.04% annually. But, you only can invest a maximum of £50 per month. Anything over and above this and you will revert back to the standard rate of sub-1%.
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9. Vanguard Total Bond Market ETF
Bonds are hugely popular with seasoned investors for many reasons. Firstly, bonds always come with a fixed rate of interest. In addition to this, bonds distribute payments every 3 or 6 months. This allows you to reinvest your coupon payments into other investments.
Fortunately, if you are interested in gaining exposure to bonds, there is a workaround to this in the form of an ETF. As we uncovered earlier, the ETF will buy and sell assets on your behalf. In this case, it will be a range of different bond types. One popular type of small bond investments available in the UK is that of the Vanguard Total Bond Market ETF.
The Vanguard Total Bond Market ETF is particularly interesting because the fund provider will rarely hold on to its bond instruments until maturity. Instead, the provider will look for short-to-medium trading opportunities. You will, however, still get your share of coupon payments. This is distributed by Vanguard on a quarterly basis.
10. iShares Treasury 20+ Year Index
US Treasuries are bonds issued by the US government. If for whatever reason the US government does not have the required cash flow to meet its bond payments, it can simply borrow more money from the Treasury.
With this in mind, investors will often flock to US Treasuries during times of economic uncertainties. The overarching purpose of the ETF is to track the current yield of long-term US government bonds.
In the 12 months prior to writing this article, the iShares Treasury 20+ Year Index has grown by over 17%.
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Platforms Offering Small Investments
If you’re based in the UK and wish to make small investments from the comfort of your home, you are going to need to find a online broker. Not only does your chosen broker need to offer your preferred financial asset, but it needs to support small investments.
IG is a UK trading site in the market for those that wish to gain access to heaps of different investment classes. Its share dealing department contains more than 12,000+ assets, including but not limited to stocks, ETFs, mutual funds, and index funds. Although the minimum investment at this platform is slightly higher at £250, you can invest much less per asset.
The exact amount will vary depending on the market. IG is also useful for making small investments as it allows you to place your assets into a Stocks and Shares ISA. In terms of fees, you will pay £8 per trade at IG. But, by making 3 or more trades per month you can reduce this to £3. The broker is regulated by a number of tier-one bodies, including the FCA. You can fund your account instantly with a debit/credit card.
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What are Small Investments?
As the name implies, small investments are simply financial assets that allow you to invest small amounts. In a time not so long ago, this was reserved to just a few options. Think along the lines of savings accounts, premium bonds, and other low-level investments.
This was because brokerage firms would only sell stocks and bonds in minimum ‘lot’ sizes. For example, a lot of shares might consist of 1,000 stocks, making it unviable for the average Joe. Bonds were even more costly to access. However, with the evolution of online trading platforms came something called ‘fractional ownership’.
As we have mentioned throughout this guide, this allows you to invest by only buying a fraction of your chosen asset. For example, if a single Amazon stock costs $3,000 but you only invest $300, you effectively own 10% of one stock.
Fundamentals of Small Investments
Some investors in the UK know that they want to invest, but they don’t know where to put their money. This is because there are thousands of financial assets to choose from in the online space.
Risk and Reward
Each and every financial instrument has a risk vs reward ratio. Put simply, this means that the higher the potential returns of the asset, the more risk that you will need to take. At the lower end, the likes of government bonds and savings accounts come with the lowest risk.
In turn, the amount you can make on your small investment is going to be tiny. If much higher returns on your small investments are what you seek, then you’ll need to look at other assets.
Current Market Price
Before making small investments into the financial markets, you need to look at the asset’s current market value. One way to gauge this is to look at the health of the wider markets. For example, with the odd exception, stocks made double-digit losses in the month of March.
This was a result of the fear associated with the pandemic. But, a lot of stocks bottomed out, subsequently going on an upward trajectory that in some cases, is still ongoing.
Income or Growth
For example, some UK investors are happy to leave their assets growing over more years. In doing so, they hope to sell the asset for significantly than they paid. This is known as capital gains. On the other hand, some investors seek a more consistent, regular flow of income.
This might come via dividend stocks or a basket of bonds.
Thanks to the age of digitization in online stock brokers, it is now possible to make small investments into a range of financial markets.
This includes everything from stocks and bonds, to ETFs and mutual funds.Kane Pepi is a British researcher and writer that specializes in finance, financial crime, and blockchain technology. Now based in Malta, Kane writes for a number of platforms in the online domain. In particular, Kane is skilled at explaining complex financial subjects in a user-friendly manner. Academically, Kane holds a Bachelor’s Degree in Finance, a Master’s Degree in Financial Crime, and he is currently engaged in a Doctorate Degree researching the money laundering threats of the blockchain economy. Kane is also behind peer-reviewed publications - which includes an in-depth study into the relationship between money laundering and UK bookmakers. You will also find Kane’s material at websites such as MoneyCheck, the Motley Fool, InsideBitcoins, Blockonomi, Learnbonds, and the Malta Association of Compliance Officers.View all posts by Kane PepiScroll Up