Most people have misconceptions about investing.
Some think investing is for the rich, whereas some think investing is for older individuals.
Thus, most people don’t invest at all!
It’s very much important to exactly know what investing is all about and who can invest.
Today, investing has become easier than what it was, say 20 years ago. There are paperless, online portals through which you can invest as small an amount as Rs. 100.
In a competitive world as our’s, where our goals and ambitions are much more clear than our predecessors, moving towards those goals early is the best way to reach them.
Investing is an option which helps you grow your money and make your future financially secure. There was a time when people needed a lot of money to start investing, but now, it is much easier and affordable.
As a student, even you can start investing. You’re probably thinking why you need to start investing as a student?
Let me tell you why.
What if you want to go for a road-trip with your friends? Or it could even be a long-term goal like higher-education or buying a vehicle for yourself.
The best part is, you don’t even have to earn money to invest. You can simply invest a part of your pocket money and watch it grow!
In this article
- What are the benefits of investing as a student?
- Does it really help to invest as a student?
- Funds for long-term goals (4+ years)
- Funds for mid-term goals (2+ years)
- Funds for short-term goals (Few weeks – 1 year)
What are the benefits of investing as a student?
One of the biggest advantages that you have as a student is time.
Remember, time is the most powerful thing in the world of investment.
Basically, investment helps you grow your money at the compounding rate, which means that your investment profit starts generating its own profit.
2.Cultivating the habit of investing
Planning your expenditure and adhering to it will take time to develop.This habit per se will help you save more and over a long period of time.
Let’s say you save Rs.500 every month from the time you are 18 years old.
How much do you think that amount will compound itself to after say 5 years, if the return is 15% p.a?
After 5 years, your money will amount to Rs.43,165.
Hence, cultivating a habit to invest is paramount.
Are you still not sure on how you can achieve your financial goals?
Well, starting to invest at as a student will help you achieve your goals at the planned time with a little effort.It will also help you plan your future investments and give you an idea about how much you should spend, save and invest.
So don’t think twice. Start investing.
Does it really help to invest as a student?
Every year that you delay adds up to a huge amount, as you lose out on the power of compounding.
We’ll consider a hypothetical situation.
Let’s say, you start investing as soon as you join college.
As you are a student you don’t have a lot of money, so you invest Rs.100 per week. So, that equals to Rs.5,200 per year or Rs.433 per month.
Assuming, the rate of return is 7% annually (very modest, but reasonable), you will have about Rs.17,873 invested, of which Rs.2,285 is your profit.
Now, let’s say you continue to invest Rs.433 per month till you retire. With the same return rate as 7% annually. By the time you retire (60 years), the investment would grow to Rs.15,88,669 of which Rs.13,52,564 will be your investment profit.
But now, let’s say you don’t bother to invest as a student and start investing after you have graduated, at 21 years.
Investing the same amount of Rs.433 per month at an average return rate of 7% annually till you retire at the age of 60 years will fetch you Rs.10,32,108 of which Rs.8,29,464 is the investment profit.
That is more than Rs.5,00,000 less than what you could have earned if you would have started saving as a student.
To be precise, the time difference of investment has lead to a loss of Rs.5,56,561.
This is how important a role investment plays!
Below we have mentioned few of the best funds for students. It has been bifurcated based on three investment goals:
- Long- term goals
- Mid-term goals
- Short-term goals
Funds for long-term goals (4+ years)
The primary objective of this fund is to invest in large-cap equity stocks to provide long-term capital growth to investors through active management and diversification.
The scheme was launched on 20th January 2006. The return since launch is 11.68% with and is a moderately high risk grade.
The portfolio of the fund comprises basically of banking and automobile sectors with some investments in pharmaceutical, oil and gas and other sectors as well.
92% of the fund is made up of equity assets which are invested in large cap stocks.
As a student you can get an opportunity to invest in large cap stocks of the market.
This fund will invest in leading companies and usually, these companies are relatively less volatile as compared to smaller companies of that sector. In fact, their returns are also more stable.
Returns per annum
This scheme was launched on 5th January 2010. The return since launch is 12.99% and this fund is moderately risky.
The portfolio of this fund is made up of 85% equity. The investment is diversified primarily in banking, automotive and technology sectors.
This can be considered a good scheme for students, as it provides an exposure to the market as well as a good annualized return.
Investment in a large cap fund help students to garner decent returns and keep the risk factor at bay.
Funds for mid-term goals (2+ years)
This is an aggressive hybrid equity fund and aims at long term capital appreciation by investing in equity and equity related securities.
The scheme was launched on 14th January 2000. The return since launch is 11.75% and it has a moderately high risk grade. The fund provides high returns and has a consistent performance.
67% of the portfolio is invested in the equity market. The equity investment is majorly dominated by the banking sector.
As a student, you can consider investing in this scheme as it has a consistent return. The risk factor is a bit high as it invests in equities but the chances of high returns also increase.
This scheme primarily invests in debt and money market.
It was launched on 3rd November 1999 and the return since launch is 14.72%.
The portfolio comprises of 68% investment in equity, 16% in debt and 12.5% in the money market.
The equity investment is diversified in the leading sectors of the market.
This is a good scheme for students as the portfolio is a mixture of debt and equity.
Investment in debt will act as a cushion if the market becomes highly volatile and equity gives a chance to earn high returns from the market.
Funds for short-term goals (Few weeks – 1 year)
This is a debt fund and investors primarily invest in these funds to fulfill short term goals.
You can invest in this fund for even a few weeks, if you’d like. These funds have a relatively low risk. The return since launch of this fund is 9.63%
The fund invests 66.6% in debt and 33.4% in cash. This fund is good for students as they are safe and apt if they don’t want to jump into the world of equity at their first go.
After reading this article, we’re sure you want to start investing.
In fact, It’s very simple.
A bit of research is required and you must understand what your risk profile is and the duration you want to invest for.
Further, you should keep a check on the performance of your investment from time to time.
Disclaimer: The views expressed in this post are that of the author and not those of Groww