Investing your first £1,000

Investing your first £1,000. Vestpod
Open the door to new opportunities. iStock.

Emilie Bellet, founder of VestPod is our guest blogger this week.

VestPod; is a digital platform with a big mission: to make it easy for you to be smart about money. They have been recognised by the Women in Fintech Powerlist for 2016 by Innovate Finance.


Congratulations, you’ve put your first £1,000 aside for investing! If you’re fortunate enough to be in the position to begin investing it can be daunting. Taking a leap into the unknown, especially the financial unknown, can be very risky.

This is the point where people often opt to seek professional financial advice to help kick-start their investing careers. Such advice can come at a price and may be off-putting, as it can immediately swallow a sizeable chunk of your investment money, however this should not deter you from seeking professional advice, as many products pose as a risk to your capital and only some products will be protected by the Financial Services Compensation Scheme.

So, to help you evaluate the risks and to help you try to mitigate them, here are some of our points to remember when investing your first £1,000.

Tip: Before investing, consider paying off your debts and starting an emergency fund for short-term funding. Only invest what you can afford to lose as your capital may be at risk depending on the product(s) you choose. 

Why do you want to invest?

It’s important to know what your goals are and decide on a clear investment strategy, below are some points to consider:

  • Define your goals: are you investing to protect and grow your capital? Or, maybe you want to gain some additional income.
  • How long are you willing to invest for? Some financial planners offer long term investments (a minimum of seven years could be considered a long-term investment) however, if you do not feel confident investing in the long term, some platforms allow quick access to funds. Shop around and weigh up the pros and cons of each platform carefully.
  • How much risk are you ready to take? You need to be certain that you can risk investing your surplus cash, and that you can afford it.

It may be worth trying to determine what type of investor you are. You may identify as a high-risk investor who would prefer a better rate for a riskier investment, whereas a risk-averse investor will not want to lose money so will settle for a lower rate of interest on their money. This is Money’s article on investor classification can be a great starting point.

Compound interest

The whole beauty of compound interest is that it is “interest on interest”. In the scenario below, it is assumed that all interest earned is reinvested back onto the platform at the same rate.  Ok, you say, so what does this mean in practice?

Example of compound interest
Years/Interest rate 1% 2% 5% 10% 15%
1 £1,010 £1,020 £1,050 £1,100 £1,150
5 £1,051 £1,104 £1,276 £1,611 £2,011
10 £1,105 £1,219 £1,629 £2,594 £4,046
15 £1,161 £1,346 £2,079 £4,177 £8,137
20 £1,220 £1,486 £2,653 £6,727 £16,367
25 £1,282 £1,641 £3,386 £10,835 £32,919


 

So, investing £1,000 today for a period of 15 years at an average annual rate of 10% and assuming all interest is reinvested, could leave you with £4,177. Wow.

Once you determine your investor type and find the correct investment product for you, remember to only invest what you can afford and to always do your research, as your capital may be at risk depending on the product(s) you choose.


Please note that Growth Street is an investment product and not a savings account. Your capital is at risk if you lend to businesses and lending is not covered by the Financial Services Compensation Scheme. Forecasts are not a reliable indicator of future results.

Growth Street Exchange Limited is an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (no. 574048)


About Vestpod

The articles and information made available on Vestpod are provided for information and educational purposes only and do not constitute financial advice. Vestpod provides general information and does not attempt to provide personalised financial, legal, tax or other advice of any kind. The owners of Vestpod are not certified financial advisers. You are advised to consult with an independent financial advisor for advice on your specific circumstances.

Vestpod is a digital platform with a big mission: we want to make it easy for you to be smart about money. We have been recognised in the Women in Fintech Powerlist for 2016 by Innovate Finance.

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Written on in Investing
VestPod Founder