A college student may think that investment is not his cup of tea because he does not have enough money, knowledge or experience for starting the investment journey. But this is not true. In fact, this is the best time to start investing. If you are a college student, then you have the unfair advantage of time which is crucial for creating wealth. It is not the amount but the time up to which you can remain invested which makes all the difference. You also have risk taking capacity while you are a student which along with time makes a deadly combination for creating long term wealth. In this post, we will discuss few tips of investing for college students and understand why this is the best time to start your investment journey.

Make a Habit of Saving

Investing requires money. From where the money will come? Obviously whatever you earn you must save a portion of it to invest it further. It is not important; how much amount of money you save? What is most important is to develop a habit of saving from very early. You should ensure that a fixed percentage (say 10% or whatever you decide as per your capacity) of your income should go in the saving account every month. Whatever is your source of earning, whether it is your pocket money, money earned from internship or job, etc., just allocate a fixed percentage of it for saving as soon as the money comes to you. Initially when your income is less you will save less but later on when you will you will earn more, your will be able to save a substantial amount. It will be nice if you open a separate bank account dedicated for your savings only. Whatever money is saved in this account should be used for investments in stocks, mutual funds or any other investment instrument. The key to make wealth is to save and grow this amount by investing it further in high yielding instruments such as stocks, mutual funds, etc. Developing a habit of saving a fixed percentage from your income and maintaining it lifetime will help you create wealth in the long term.

Use Risk as a Tool to Make Money

Investment is always associated with risk. All the high yielding investments have more risk. When you start early, right form your collage days, you do not have much responsibilities. Your risk taking capacity is more when you are a student. So this is the best time to invest aggressively in risky but high yielding instruments such as stocks, mutual funds, etc. Time is your side and the earlier you start, the riskier your investments can be. The longer you can hold your investments the more you will reap the benefits of power of compounding.

Make Strategy for Investing Long Term

As discussed earlier also, you should aim for investing your money long term. As you begin investing since collage life, you can afford to invest your money for long term. This has many benefits. Firsts you will not worry about temporary downturns in your portfolio due to recession in market, etc. and second you will get benefit of power of compounding. The long you will keep your money invested in, more you will get the benefit of compounding. Compounding means the return on your investments is being invested again and again, which has the power to grow your money manifold. Long term investment generally means 5 years or more. You can keep your money invested in for years and even decades. If you will aim for long term investments, you will certainly be able to make huge assets when you will be on the verge of retirement.

Only Invest What You Can Afford

You should invest only that portion of your income that you can afford. Don’t invest the money which you will need in the short term because once you invest your money, withdrawing that quickly may give your negative returns instead of positive returns. Some investments specify a fixed tenure for maturity and when you withdraw your investments before that specified period, heavy penalty may be imposed and you may be at loss. The investment in stocks and mutual funds usually give good returns in the long run but if you invest in them for a short period, the returns may be negative.

Start Early and Regularly

Starting early and regularly is the key to make wealth. It is not the amount but the time of investment which makes you rich. You should have a discipline to set aside some fraction of your monthly income for investment. If you will do this regularly for a long time, your wealth will grow slowly but regularly. In the long run you will observe that the compounding effect has started adding substantial amount to your investment every year and after a certain time your wealth will begin growing quickly. But to make compounding work for you, you will have to wait for a long time say 8 to 10 years or more. Therefore, when you will start early, you will have enough time to realize the benefit of compounding. Starting while you are in college is the best time to be a successful investor in the long run.

Build Your Knowledge

Your knowledge is your most important tool in your journey of investment. Therefore, you should try to enhance your knowledge about investing form every available source. Make a habit to read good books about investing. There are many blogs or you tube channels available which can provide your good insight about investing. Try to dedicate sometime in the morning for learning and invest in yourself, so that you may build your knowledge and gradually you will observe that you have developed sufficient insight and wisdom needed to grow your wealth and your will feel more confident when investing in risky avenues.

Consider a High Yield Saving Account

Choose a saving account which gives you best interest rates along with all other facilities. There are many banks in India which can offer a high yielding saving account. Compare interest rates of all the available banks in your city and choose the one which offers best interest rates. Some banks in India offering high yielding saving accounts are given below:

Choose a Low Cost Broker

Investing in stocks or mutual fund is always associated with a cost. The stock brokers usually charge brokerage when you buy or sell the stocks. There are some brokers available which charge very low brokerage and they are also called discount brokers, so while choosing the stock broker you should keep this in mind and select the best investment broker after comparing all the charges.

Below are mentioned few discount brokers available in India, which you can consider for stock investments:

(1) Zerodha

(2) Upstox

(3) Groww

(4) Angel One

(5) Bajaj Finserv

(6) Paytm Money

(7) SAMCO

(8) 5paisa

(9) Fyers

(10) Alice Blue

Invest in Index Funds or Mutual Funds

When you begin your journey as an investor, your knowledge about investing is limited. Therefore, to begin with, you should not go for risky investments. Index funds and mutual funds are safe investments at this stage, which give you a decent return without risking your money. Later on, when you gain enough experience and knowledge, you may explore other riskier avenues, like direct investing in stocks, etc. Index funds are the type of mutual funds or exchange traded funds (ETFs), which invest in stocks that give a return of stock market index like the NSE Nifty, BSE Sensex, etc. You can also choose mutual funds having good past record for investing your funds. These funds are managed by expert managers having knowledge, experience and all the latest tools for analysis, so you need not to worry about losses. The only thing is that these funds charge a small amount of your investment for managing your funds.

Conclusion

The collage time is the best time for starting your investment journey when you have the biggest unfair advantage with you, that is, time. If you begin while you are a student, then you can afford to invest for a long time and you are also in a position to take risk. These two factors, i.e., investing in risky but high yielding assets along with staying invested for a long time will make a deadly combination for creating wealth. Don’t be discouraged that you don’t have enough money, knowledge or experience. The most important thing is that you have time at your side. Cultivating the habit of saving and investing it in right instrument is the key to become wealthy. Therefore, you should always strive to enhance your knowledge about investing so that you can become a good investor in the long run.

Also read: Things to Keep in Mind Before Taking Education Loan