It’s common sense that beginning to invest earlier will yield greater results over time, and yet, many student-aged Indians (and older) don’t take advantage of investment opportunities.
When you’re young, it can be difficult to fully realize how important investing is, especially when you may only be working a job that pays just enough to have some fun, leaving you with little leftover. But investing doesn’t have to be a scary or intense process that takes away all your money in the present!
Here are some tips for learning how to invest as a student so that you can live with more peace of mind in adulthood and beyond.
The Best Age to Start Investments
When should you ideally begin investing? The bottom line is: the earlier you can invest, the better. Investment mogul Warren Buffet began investing when he was just 11 years old!
But, for many, starting that early just isn’t practical.
Instead, many start saving once they get their first job and start earning money. Young people under age 20 can start even with very small amounts since they have a long, long time for their money to accrue interest. As people age, they will need to consider investing more money per month to make up for lost time.
Why should you start investing as early as possible? Here are the benefits of investing at a young age.
More Time to Learn and Take Risks
Since you still have a lot of time left in life to invest, learning how to invest at a young age means you can learn by doing, including taking risks. When you are only investing small amounts, you also only stand to lose small amounts, so playing around with your investments can help you learn more about the ins and outs of the practice.
Better Compound Yields
Investing even a small amount at a modest rate will add up over time. Having any amount of money in an investment account for a long time will add up to a nice sum in the future. And, you can always add more money to it periodically as you age.
Why Invest?
Investing is a great way to make your money work for you. You supply the up-front funds for another party who uses that money to create more value, and you get a certain amount of interest back, effectively active like a form of income.
If you choose a type of investment that doesn't require your input, it's the same as passive income!
Investing for your future will save you a lot of headaches. Even modest amounts of investing can help you greatly for many instances, such as:
- college and university tuition and expenses
- buying a vehicle
- buying a house
- going on a trip
- wedding expenses
- saving for your child's future
- money for an emergency
- retirement
It's hard to think of some of these elements of life as a youth, but trust that when you graduate and enter the world of working adults, you'll be glad you set yourself up for comfort!
You might not think of investing to be a source of income, and indeed it doesn't pay as much as a job (unless you're investing huge sums of money wisely!), but every cent you make from interest is a passive cent. Over time, you can earn a comfortable amount from investments.
How to Invest Money as Students
There are several options when it comes to investing. As a student, you’ll likely want to have a conservative account and a risky account so you can grow some of your funds at a slow but steady rate for certain, while also having a risky account to experiment with.
High Yield Savings Account
By far the easiest, simplest, and most conservative investment method, HYS accounts are the best choice for students who want to begin investing for the first time.
They offer a safe way to ensure a return with interest while being very low-maintenance.
You can also withdraw the money if something comes up and you need it.
There are also many other options for savings accounts if you would rather stash your money in a more secure place besides getting involved in stocks.
Stock Market
Get a head start in learning about stock exchange by setting up a systematic investment planning (SIPs) routine. If you’re interested in learning deeply about stocks, you can even monitor the market daily and make trades yourself using websites or apps that allow for such things.
Try looking at the Nifty 50 (the top 50 companies in India on the Nifty Index) as well as Exchange Traded Funds (ETFs).
Mutual Funds
Mutual funds are at the intersection of HYSAs and stocks. They are one of the best investment ideas for students. You can simply deposit your money into the mutual fund and allow it to be managed by the fund company, rather than making stock decisions and trades yourself.
Additionally, mutual funds invest in very stable things like government bonds, ensuring their success.
United Linked Insurance Plan (ULIP)
This is a type of savings account that also allows your deposits to be invested and gain interest. Part of your premium each pay period also goes towards life insurance, so you get two types of assurance for your future in one product.
Bonds
Bonds are a secure form of interest-accruing account that have a modest return. They are beneficial because you are guaranteed to receive the amount of interest promised when you create the account. They are an easy choice because they are extremely hands-off. They typically have a fixed period where at the end, you can withdraw the mature amount.
Employee Provident Fund (EPF)
While this type of fund acts like a savings account, you can easily call it an investment since it directly impacts your life after retirement. It is a compulsory account to have if you work a job that makes over a certain amount per year, assuring that you will have a safety net helped along by your income stream.
How to Begin Investing as a Student
How do you actually put your money into an investment?
For some options, like mutual funds or bonds, you can ask your bank or a broker to help you choose the best option for your available funds and your goals.
You can also sign up with a robo-advisor, which will act like a third party and choose stocks for you to buy and sell, so you don’t need to know the ins and outs of the stock market to make trades. Some options for a robo-advisor include ArthaYantra, FundsIndia, and ScripBox.
Until you’re ready to begin learning about stocks, it’s best to take an approach like a high-yield savings account or bond that doesn’t require you to know anything about trading.
Speak with an advisor or broker to decide which product is right for you. Do you have one lump sum you can invest, or can you chip in some amount each month? Some options won’t allow you to put more money in and others allow repeated deposits.
Additionally, some options allow you to withdraw money if needed and others keep the funds locked up for a fixed time period, sometimes for years.
When you get your first job or otherwise come into some money, it’s a good idea to put at least some of it away in an investment account. You’ll thank yourself immensely in the future!
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