A student investor is one who start investing in school or college. Many of the great investors we see today started early. Being an investor as a student has never been easy, for those from every corner of the globe alike. Added to the increasing pressure of textbook finals, exams, and the fear of being mediocre, this penultimate stage of near-adulthood calls for another set of problems. Enter: Money.

What really irks one is how students of India are never taught about personal finance by default: how to spend, save or invest their money. Alarmingly, they don’t know the first thing about money; when they’re given their first salary, or even when their parents start funding for their college expenses. Hence, they tend to go overboard with it and so called “student investor” is a rare breed.

The Real Deal (or No Deal):

So here’s the deal: It’s incredibly easy to live your life when you’re used to 20k+ a month coming straight from your father’s/mother’s pocket. However, it’s not going to be like forever. Most students imagine themselves graduating right into a pile of money and a lack of debt. (Truth be told, it’ll probably be the other way around.) If you don’t start investing and saving early on, you’re going to risk having to live a life with limited choices. The only saving grace is, with money, it’s never too early. In fact, the earlier, the better.

Before one starts investing, one must understand that once one obtains money, he/she has two choices, i.e. to spend it all, or to spend some and save some. Shooting hard and high won’t work in the initial phases, so you must attempt to aim lower. Setting goals that lie in the tangible future is realistic, ideally most students can’t see beyond graduation.

What young people have over the older ones is time. Exploiting this as an asset is the smartest thing a youngster could do. Warren Buffet started investing in stocks at the age of eleven-eleven, imagine! He went on to become the second richest man in the world. Setting aside a small percentage of one’s income at an early stage as a monthly investment is far more rewarding than starting to understand stocks and bonds at the age of 40.

Placing your options on the weighing machine:

Suppose a twenty year old saves thirty rupees a day. At the end of the month, he/she has 900 rupees. If he/she invests in a diversified mutual fund that gives 12.5 % returns pa, he/she becomes a millionaire in less than forty years.

However, if said person decides to spend on extravagant meals and a plush lifestyle through his twenties, and he finally decides to begin investing at the age of thirty, the savings he will have to put in will surely increase.

So what does one do? And how does one decide how much to invest, where to invest?

Depending on how far or near into the future one’s goals lie, one decides where to put their money.

Suppose you are an international student on loan who is graduating in a couple of year. You’d much rather invest in a low-risk vehicle with high returns instead of in the stock market, which could easily take years to mature. Otherwise, you might be forced to sell your stocks during a downswing when you graduate.

The Golden Triad of Risk in Investment:

Another factor that must be looked into is that of risk. One’s portfolio should be worked according to the Pyramid of Risk. Building the base of the pyramid is important, with insurance and savings for short term needs comes in. As one ascends to the top, the risk increases, and hence, the money spent on such should be used warily. Any kind of investments is subject to risk. So it is important to evaluate risk for each option.

Student Investor vs Student Spender:

What poses to be the biggest problem for millennials while attempting to save is the excessive expenditure on depreciating assets. A car (unless classic), a gaming console, a smartphone, or anything else that’s popular and mass-produced all depreciate in value the second you pay for them and take them home! Investing in what we are losing out on, in what the world deems rare is what makes a good investor. Vintage toys, gold, land, stocks and bonds are just some examples of assets.

Conclusively, many have learnt that hard way that it is no joke to say that it pays (literally) to start saving and investing early. And it does indeed!