The concept of investing for students is similar to buying insurance: you know that it is important enough to demand your attention, but more often than not, you will shrug it off, thinking that you will do it once you have a stable income.
Besides, with other things such as meeting deadlines for onerous school assignments, keeping up with social life and furiously taking insta-worthy photos, the last thing you want to be doing is to read an investment book.
But investing doesn’t have to be difficult. And contrary to popular thinking, you can and should start investing when you are young, even while you are still a full-time student.
Here are some things you should take note of when you start your investing journey as a student.
Address Your Debt Issues First
Some students finance their university education through student loans. It is important to first look at debt matters before invest. Since investing by itself already comes with risk, the last thing you would want is to worsen your current financial position rather than to be improving it.
Local university students have the advantage of taking up interest-free loans till graduation while students studying overseas or in private universities may have to pay interest on their loan. If you have an interest-free loan, this means you don’t have to worry about interest repayment during your years in school. This gives you less to worry about when you start investing.
For those who have debt or interest repayment to make, it’s important to ensure that you set aside sufficient savings first to cope with these repayments. Avoid being caught in a situation where you are pressured to liquidate your investments to meet these repayments.
Using Dollar Cost Averaging
For most students, investing a large sum each month would not be realistic. After all, we are still students without a fixed salary.
However, if you are able to set aside about $100 each month, you can get access to the market by using a platform such as the Monthly Investment Plan offered by Maybank Kim Eng. Doing so allows you to make investment from as little as $100 each month while keeping your transe\action cost to a manageable level of 1%
This is a much better way than to buy stocks directly, which usually comes with a minimum transaction cost of $25.
ETFs or Individual Stocks?
Students can consider ETFs as their first investment. For example, buying the STI ETF offered by Nikko Asset Management allow investors to automatically achieve diversification in 30 of the biggest company on the SGX. Investors can earn the market return, without having to buy individual stocks.
Buying individual stocks is also an option. For that, the assumption is that students are confident about the potential of the companies they are investing in, and have insights about the company that they think other people don’t.
Equipping Yourself With Investment Knowledge
Even if investing today is not something you are looking to do, there is no reason why you shouldn’t equip yourself with some much-needed investment knowledge for the future. You can attend investment courses offered by the SGX Academy specifically catered for beginner investor. By attending such talks, it enables you to gain a basic understanding of investing.
You can also start a virtual portfolio and start tracking some companies you like. Once you have the financial capability to invest, you can have a portfolio of stocks to choose from immediately.
If you want to learn more about why ETF investing makes sense for students, join us for a specially organised DollarsAndSense.sg introductory talk on ETF investing. We will be sharing more about why we prefer ETF investing and how you can get started on it.
Start Early, Start Today
For many students, it is easy to overlook the importance of starting investing early. We procrastinate because we think we have more time in the future and that we don’t have enough money today. But that is not true. We can always start small, and learn along the way as we grow older. When we are more confident in the future, we can then start investing more.