You must have often heard experts advising you begin your investment journey as soon as possible. Why you may wonder? Well, for starters you largely benefit from the power of compounding. Also, when you are young, you have fewer responsibilities and also lesser to no dependents. As a result, you can invest your money to earn significant returns on your portfolio. This article focuses on a few investment tips for college students before they begin their investment journey in the stock markets.
Here are 5 investment tips for college students:
Tip 1 – Understand the basic difference between saving and investing
While saving is the safe way to preserve your wealth it means that you would earn low returns on your investments. On the other hand, investing your money might expose your investments to higher level of risk but it also has higher potential to earn significant returns. In essence, the higher level of risk, the higher are the chances to earn high returns. This concept should be clear among college students.
Tip 2 – Hold on to your money and investments
College students usually have the tendency to go all crazy on their money provided that they have a continuous supply of cash. However, if students try to save a part of their funds and invest, they will earn returns which would benefit them in the long run. College students often have a misconception that they need significant funds to invest in mutual funds. However, that’s not true. You can choose to invest in mutual funds via SIP which allows you to divide your investment amount into smaller, insignificant investment amount.
Tip 3 – Understand the basic concept of investing
There are a few basic concepts involved with investing. You must always make efforts to diversify your investment portfolio. Diversifying your investments help to offset the losses that might arise from any one type of investment against gains by another investment. Understand basic investment terms that will help you to invest in mutual funds.
Tip 4 – Research Research Research
One of the most important guidelines that young investors need to get a hold on is that they must do exhaustive research on their investments and their underlying index. There are several risks associated with investing in investment options that are market-linked. They must analyse the companies past performance. Also, they must analyse their fund’s returns across different market cycles to understand how they work when the markets are high and when the markets are low.
Tip 5 – Don’t get carried away with your emotions
When you enter the world of investing, you must understand that investing in the markets is a vulnerable yet addictive place. An investor must never get carried away with success that is short-term. They should also never let their emotions have the best of them. Investors, especially new investors often get swayed away with market investments.
Lastly, your job does not end at mere investing. You must regularly track your investments on a periodic basis. This will give you a clearer idea on how your funds are performing. If they have constantly performed poorly for at least 3-4 years, then you might consider shifting to different funds. Happy investing!