When you find yourself with a bit of money left over at the end of the month, it can be tempting to spend it on things such as clothes, shoes or gadgets. However, the chances are there are much better uses for that cash. If you’re smart about what you do with your money now, and get it working, you could set yourself up financially for the future. With that in mind, here’s a look at three ways you could invest £500 today.
If you’re new to investing, mutual funds can be a good place to start. The way these funds work is that your money is pooled together with the money of other investors, and then is managed by a professional fund manager. It’s an easy way to invest because the hassle of researching stocks and deciding when to buy and sell is removed.
There are many different mutual funds available in the UK and if you’re looking for some ideas as to the best funds, I’d recommend heading over to Hargreaves Lansdown (the UK’s largest investment provider) and checking out its new ‘Wealth 50’ list. This is a list of its 50 preferred funds put together by the group’s investment experts. There are some excellent funds in the Wealth 50, including the Lindsell Train Global Equity fund, which has returned almost 140% in the last five years and is available with an ongoing fee of just 0.52% per year. Whether you’re interested in investing in the UK, internationally, or with a niche focus, the Wealth 50 could have a good option for you that could help you boost your finances.
Another option to consider is an exchange-traded fund (ETF). These let you track key markets or indices (such as the FTSE 100 or the S&P 500) for a very low fee. They’re a great way to get cost-efficient exposure to the stock market.
For example, the Legal & General UK 100 Index Trust – which tracks the FTSE 100 index – is available on the Hargreaves Lansdown platform with a fee of just 0.06% per year. If you’re looking to keep things simple and keep fees low, an ETF such as this could be the way to go.
Finally, a third option to consider is buying an individual stock. If you fancy yourself as a bit of stock picker, there’s nothing to stop you from investing in individual companies yourself.
Now I’ll point out that this option is a little riskier than investing in a fund because funds offer more diversification. In other words, if you only buy one stock, all your eggs are in one basket.
However, at the same time, individual stocks do offer the potential for big gains. For example, look at Boohoo, or Fevertree Drinks, which are both up nearly 400% in three years. If you got in on one of these stocks three years ago with £500, your money would now be worth over £2,000.
So, if you have £500 to spare, think twice before you rush out to spend it. Invest it sensibly and you could set yourself up for the future.
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Edward Sheldon owns shares in boohoo group. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.