3 Cheap Ways to Invest

It might seem strange to refer to cheap ways to invest, as one of the purposes of investing is to make as much money as one can, but sometimes it can be necessary to invest a minimum amount to be allowed to invest at all.

Premium Bonds

By the end of March 2019, the minimum amount that you were required to invest in a Premium Bond was reduced from 100 to 25, making it the minimum purchase for NS&I’s customers since 1993. This would seem to be in line with the fact that the lowest prize that you can win is 25.

To look further back into the history of Premium Bonds would be to explore the reason why they were introduced in the first place. It was to help with the control of inflation by encouraging saving after the Second World War. Officially, Premium Bonds were introduced in 1956 by the then Prime Minister Harold McMillan. They were then sold from 1 November 1956. Over this time, they have become a popular way of saving in the UK. Your investment remains as it is and the prizes represent the equivalent of interest.

If anyone has some old Premium Bond certificates sitting in a drawer that might potentially have unclaimed prizes attached to them, because of having changed address and not let NS&I know, you will be pleased to know that there is no time limit on staking your claim. Should you win a million, and you have kept your address details up to date, you will be visited by a representative of NS&I called an “Agent Million”. You will just be advised to check their ID, although that would be a cruel prank.

Banks

In the UK, you can start a bank account for as little as one pound. Then, there is no obligation to invest anything more. It is primarily a safe place to keep your money, however some accounts will offer small rates of interest. A good idea would be to have two accounts with the same bank – a current and account and a savings account. Then, with online banking, you can regularly switch funds between the working current account and your higher interest savings account. Alternatively, you can set up a monthly standing order to transfer money between the two accounts without you having to physically do it. With a standing order, the other account can be with a different bank. Although, you can put all your eggs in one basket, so to speak, because you have protection for monies held in a bank account or similar financial institution. From January 2017, the limit set by the FSCS was 85,000, or 170,00 with a join account. Money held with European Banks also has this same protection, up to a threshold of €100,000, at the time of writing.

Stocks and Shares

There is no minimum investment with stocks and shares but whatever online service that you use there is going to be commission and brokerage fees to pay from trading. So, to make it cost-effective, you will need to look at investing a sum to cover these when considering the kinds of profits that you might make.

You can choose to invest in established companies that you believe will continue to do well, or you can take a look at “Aktien von neuen Unternehmen” or buying “shares of new companies” as we would say over here. There are benefits to both and normally your broker will be able to help you decide.

Believe it or not, stocks and shares have a different meaning. Stocks describe owning a slice of one or more companies. Shares refer to ownership of a particular company.

The different types of stocks that you can buy include common stocks, preferred stocks, growth stocks, value stocks, and income stocks. Common stock in the US is a type of corporate equity ownership. In the UK, common stocks are known as equity shares. Essentially, it is sharing in the ownership of a company. Many people when they invest in shares often choose to go down the route of fractional shares which they can obtain through companies like SoFi in order to get rid of some of the risks and still earn a slice of the profit. In the event of bankruptcy, preferred stock, or preference shares, have their dividends paid out to shareholders before common stocks do. As their title suggests, growth stocks generate significant and sustainable positive cash flow and have revenues that are expected to increase at a much faster rate than other companies in their industry. With a value stock, its price will appear low in relation to its performance. Performance measures are its revenue, earnings, dividends, yield, and profit margins. An income stock is a type of equity security that pays a regular, and often steadily increasing, dividend. They generally offer lower levels of volatility for the investor.

So, however little you want to invest, there should be a way of earning a return on your money.