Whether you’re a fresh graduate looking for a job or a college student who wants to pool in some pocket money after paying off the student debt, investing is a great medium to save money and help you attain your future goals. Investing might be the last thing on your mind, but since you’re young and have ample time before you retire, it’s ideal for you learn about investment early. Moreover, with the arrival of the online demat account, investing has become even more accessible for college students.
All you need to do is learn the basics of investment and then know how to do it with precision. Here are some valuable tips to help every college students excel in investing.
• Understand The Basics
You don’t necessarily have to be a financial trader to invest. However, it is imperative to learn and understand the basic jargon’s used in investment to help you make informed decisions and stay up-to-date with the industry standards. If not performed correctly, investing can cause major setbacks in the form of loss of savings or money. Thus, study the different investment mediums such as stocks, bonds, PPFs (Public Provident Fund), mutual funds etc, and find one that suits you and your financial standing the best. You should also gather information about important financial theories such as portfolio diversification, optimization, and market profitability. Reading journals and books written by successful investors such as Peter Lynch and Warren Buffet is also a great way to master the basics of investment.
• Invest A Small Amount
Getting into investing without reviewing your finances is similar to jumping out of a plane without a parachute. First, access your cost of living and any payments to loans or credit card balances you need to pay off and then ascertain the amount left to invest. Fortunately, you don’t require a significant sum to start investing as there are a plethora of options in which you can invest for very little money. Putting aside ₹500 or ₹800 in a month or two is far better than investing nothing at all. Start your investment journey with a small amount and focus on increasing it in the long run.
• Ascertain Your Risk-Taking Ability
Before determining which investment medium you want to opt for, identify your risk-taking ability. Investments that bear more risk generally offer a higher return on investment (ROI). Similarly, moderate risk investments offer a lower rate on the profits earned. In an ideal situation, an investment portfolio that has a high ROI with minimal to no risk is the perfect goal for an investor. However, this may not be true for a college student who has just started investing. Thus, determine your risk tolerance and invest your money accordingly.
• Set Your Investment Goal
Now that you’ve understood the basics, set your investment amount and determined your risk tolerance, your next step is to is establish your investment goal. As a college student, you may not have high-end goals, but it is good to have a solid investment strategy to accomplish your different needs and obligations. Creating a plan will help you determine the best investment medium to meet that particular goal. For instance, If you are saving for a new phone, investing money in a Bank Fixed Deposit (FD) will help you generate cash in a short period and without any risk of losing money. If you want to start saving for retirement, a savings-cum-tax-deferred account – such as a PPF (Public Provident Fund) will be highly beneficial as the interest generated on the money put in a PPF account is tax-free.
It is best to stay away from high-risk investment options as you’ve just begun, but if you wish to have a diverse portfolio, you can spend a small amount in stocks or mutual funds to understand the possibilities of the investment business.
• Self-Directed Funds vs. Managed Funds
The next decision is to choose whether you want to go with a self-directed investing account or a managed fund account.
Self-directed funding is a DIY (do-it-yourself) type of investment wherein you not only finance your account, but you also manage all of the investing specifics. You design your own portfolio, analyse and select particular investments, and then choose when to purchase and trade them. In the case of managed funding, you take help from a financial manager who handles all of the aspects of investment for you. This covers features like building a portfolio to selecting investments that work best for you and your financial growth. All you need to do is pay a nominal fee to the manager, and everything else will be taken care for you. For college students, managed investment is the preferred choice considering you are primarily focused on your education.
Investing while you’re in college will give you the substantial experience that you will require to be a lifelong investor. Just give yourself time and some room for your money to grow. Plus this will also come handy when you wish to start investing your income. Remember not to be afraid to commit mistakes with your investment choices as you can always make them right in future. Think of it as a valuable training method to learn the basics of investment.