Why you Should Invest Even If you Have No Money

Investing carrot on a stick. Savings is the goal

During a company lunch, the main theme was investing for a change. It’s tech-related stuff usually along with IR35 for the past 6 months. Like most people, my colleague Alex thinks buying your first home is one of the best investments you can make. Rent is dead money after all.

I briefly argued against the point saying that although I’m a pro-buy-your-own-home person, it’s more about the security and the comfort that your own home can provide rather than the financial benefits. Probably half the amount you initially pay is dead money interest and then you have maintenance costs and property taxes to pay (if you’re not in the UK).

Not to mention your own labour costs if you decide to paint the rooms in your spare time “for free”. Then also the total monthly payment is usually higher than the equivalent rent. This means there’s an opportunity cost of the rental money surplus as well. Simply put, you could have invested the money difference in a BTL, gold, stocks or whatever.

So buying is not exactly a clear winner compared to rent.

But why am I talking about property buy-vs-rent again? This article is about starting capital when investing! 

Thankfully, Alex started talking about other investments after reaching a point where only spreadsheets and assumption-fights can give some meaningful progress to this discussion.

So he started making the point that the reason most people don’t invest is that they don’t have much capital to start with.

And what is a 10% annual return on £100? Just £110. Not much to show at the end of the year!

Naturally, this makes sense. I’ve definitely heard that before. But I believe is inherently wrong. Here’s why.

1) It’s not about investing £100, it’s about saving £100

Investing £100 or even £1000 won’t make much of a difference, indeed. Not even compounding these returns over 10 years will.

But the biggest personal finance wins come from building the habit of saving £100 to start with. £100 invested is £100 saved which is much more important in the beginning.

So if someone hasn’t really invested or saved before, learning to save is an absolute must. People overestimate what they can do in a year and underestimate what they can do in a decade.

Even if you make some bad investments that actually lose money, it’s much better than not having saved at all.

2) If you do need much capital to start investing, how much is that?

Ok, so say you do need much capital to make investing count. What is the cut-off point? And are you sure that when you actually DO accumulate the desired amount, you’ll be able to execute your investment plan with confidence?

Investing is half finance half psychology.

I’d argue it’s more psychology for the average investor and more finance for institutions, trust funds etc. I never felt “now is the right time to invest”. It always feels uncomfortable.

So when is the point that you start investing? How much do you need to accumulate first? Maybe £10k will only bring £1,000 a year, so not much impact there either. How about we agree it’s £30k, for £3,000 a year? Will you ever reach that point or will you spend it on the way? 

I guess it’ll be hard to stick to your plan and keep accumulating until you reach £30,000 when you have £10,000 sitting around in your bank balance and you’ve never invested before.

So how will you overcome the biggest barrier called fear?

3) Mistakes are cheap when you start small

A 20% loss on £1,000 is just £200 which you can probably live with(out).

A 20% loss on a £30,000 portfolio is £6,000, a much harder lesson to learn the hard way! You may even lose 20% on the first day of your investing. These things seem surreal in the past decade of euphoria, but these things have happened.

Learning how you behave in a declining market is a lesson better taught when you’re poorer.

When I started investing, I was paying a 6% annual fee before my money is invested in an ISA (thanks SJP). If this sounds like too much to you, it’s because it is! So I was giving up 80% of my average profits. This was an expensive lesson which lasted for a year until my eyes opened.

So paying these lessons with small investments comes much cheaper overall.


Although the argument is clear, it’s kind of counterintuitive.  I kind of get it. I was always a natural saver. But I only started investing when I had £1,000 surplus every month.

What’s the point anyway, I was thinking. But I now clearly see that if I had invested earlier I could’ve been in a better place now.

If I have a £1,000 surplus a month, I’m not living paycheck-to-paycheck. Therefore, I don’t really need to save as much compared to a person who’s struggling to make ends meet. £100 a week saved/invested is £5,200 a year. Relatively speaking, £5,200 a year may not change my life but it might as well do for someone who’s struggling.

With modern brokers such as Freetrade, you can start investing £100 a time in stocks, gold ETFs whatever you fancy. Fractional shares. But remember, investing is the carrot on a stick here. The biggest gain comes from the fact that you’re saving before investing.

It’s better to build this habit of investing the earliest possible. Even if it’s £10 a week. It will build a good habit, naturally grow your snowball and make you more confident for when your investments actually do make a difference.

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5 thoughts on “Why you Should Invest Even If you Have No Money”

  1. You may have already answered this question before, in which case I apologize for repeating the same questions, but what about investing when living from paycheck-to-paycheck? When is the ideal time to begin investing and trying to make money outside a full-time job. I am 20 years old now and I try to start living on my own accord without any financial assistance from my parents. I’m currently working in a part-time job to help with “survival costs” each month and rent, in addition to studying in university for the final year. Any tips, references for beginners such as me?
    Your website has amazing articles which I wish I could understand better! Either way, keep it up!

    • Hey George, starting to invest in such a young age is by itself a big win. Not only you’ll be forced to save in order to invest, but you’ll give yourself a long time horizon for your money to accumulate. Compound interest is the 8th wonder of the world.

      I think the biggest lie in personal finance is that you need to cut your morning latte to start investing. The biggest advice I have is to increase the money you make in your profession while also living within your means. There’s only so much you can save at the end of the day. So the more you can make early on, the easier it will be to invest the difference.

      Having said that, “Lifestyle Inflation” is an easy trap to fall into though. Now you’re only working part-time but when you finish uni and invest in yourself (education, online courses, crafts, side hustles etc) then your income will quickly go up. Most people just spend more when they earn more.

      You, only, can find the balance of what makes you happy, but personally speaking, I know that spending more above a certain level won’t make me happier. Having the freedom to do what I want or to not worry about money because my investments “work” for me is a great feeling.

      So start investing as soon as you can save, and try to make it a monthly habit. But don’t take my word for it, here are a few books worth reading:

      Rich dad poor dad
      The simple path to wealth
      Your money or your life

      • Hey Michael,

        Superb article! Completely agree on the habit of investing as early and as much possible. Also, agree on focussing on increasing income rather than cutting expenses.

        I am in a similar situation and wanted to get some views from you. I believe you have currently taken up a permanent position.
        1. Did you have to declare your directorship in your investing company to your new employer? Were there any restrictions/issues?
        2. How doesoes HMRC view this i.e. multiple employees (although this should be new as there are individuals who hold multiple directorship)?

        • Hey Satya, depending on the company you may have to declare all your directorships and business activities to your new employer. Typically, this happens if you work in financial organizations.

          HMRC is fine for you to be employed full-time as well as hold directorships in other companies. As long as you declare & pay your taxes of course 🙂

  2. Great article, Michael!
    You nicely link investing to the habit of saving. Habits can indeed be a powerful force when working towards financial independence. They automate your behavior and make it stick irrespective of what comes up.
    So, as you automate your saving and investing, you will build the machine to create a fortune. You can actually build this habit even when not being rich or making a lot just yet. As long as your machine stays adaptive to increasing income, e.g., by keeping the savings rate stable or even increasing it.


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Hi! I’m Michael and I love writing about different ways to earn, save and invest our money. Coffee addict :)

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