Students, for the most part, belong to the category of our fellow citizens who temporarily do not have enough professional experience and savings for their own business. However, many of them are keeping up with the times and are also thinking about trying their hand at being an investor. Why shouldn’t the money work while you are totally immersed in your studies? Today we’re going to look at the question of what investments can be for students. This question may be of interest to the student elements in our audience.
Deposit in a bank
The easiest way to invest. Before signing a contract, it is only worth finding out whether the banking institution is a member of the deposit insurance system. And it is important, of course, to understand that a bank deposit is more suitable for saving money for a steady high-interest income. That’s why investing books for students still emphasise that the humble bank account shouldn’t be overlooked.
When placing large sums, it is advisable to divide them between banks to ensure you’re maximising the FSCS protection available.
The advantages of the bank investment:
- ease of execution and clear terms,
- high reliability and low risks,
- a small starting threshold,
- regular interest and the possibility of early withdrawal.
Experts for economics homework help say that among the disadvantages of this way of investing is low yield, which often does not cover the rate of inflation in the modern day where inflation has recently spiked. The best economics textbooks suggest that high inflation won’t bode well for the value of cash deposits, which are eroded in spending power terms by inflation.
Securities and other exchange-traded instruments
This method of investing involves entering the stock market to purchase financial (equity and debt) instruments. Income is generated by increasing the value of stocks or bonds, as well as by regular dividend payments.
Buying shares has recently become very popular with young investors, using apps like Dodl or eToro to place stock trades with zero commission. The stock market is however relatively high risk compared to a safe bank account. Students can start investing in minutes with many apps on the market today, but they should actually take the time to study investing books and fully understand how the stock market works before they commit any money.
To conduct operations with securities and derivatives, it is necessary to register with one of the brokers. The advantages of this method of investing include a high potential yield in the long term. The variety of existing financial instruments allows you to diversify risks, but you cannot avoid them completely.
Mutual funds and trust management
By investing in a certain mutual fund, the student receives an investment portfolio consisting of various assets managed by specialists with experience. These include the best investment trusts and the best UK REITs.
This way of investing is suitable for those who do not want to understand the intricacies of the independent selection of instruments in the stock market. But it is worth considering the fact that commission costs will be high. As a rule, they eat up a considerable part of the final profit.
Asset management works in a similar way. Its essence is that investment trusts its assets to professional traders. They are interested in bringing profit for the investor because they receive a percentage of profit. However, if the strategy fails, the investor still risks their money.
Trading forex
One of the most attractive and promoted options for young trainees with a high-risk tolerance and a commitment to spending hours to perfect their craft. In truth, most FX traders lose money, so this shouldn’t be seen as an ‘investment’ but more of a gamble until you’ve proven whether you possess the skills to trade profitably. How to trade forex as a beginner should be approached very carefully and with little capital, so that any early mistakes aren’t costly.
Numerous forex trading books have been written on this subject, which constantly analyze successful strategies and even give guarantees on how to get rich in a short period of time with a small investment. In reality, not more than 30% of traders are relatively successful, while the rest simply lose money. Even the best forex brokers still boast quite high failure rates.
The underlying asset when trading forex is a long position in one of several currencies. However, the market is very unpredictable and beginning traders often lose their starting capital in a few transactions.
Opening your own business
The main advantage of this method is that a person independently controls the movement and redistribution of money. However, he has to assume all possible risks, and they are especially high at the initial stages of project development. The best entrepreneurship books make clear that it is best to open your own business in areas in which the competition is not yet too great. This is especially true when the entrepreneur does not have serious start-up capital.
Students can even untwist a small online store or site, with only a few hundred dollars, if they choose a successful niche. When there is a promising business idea, it is even possible to attract seed capital from outside or to do a common project by pooling money together with classmates. The main thing is to make a competent business plan, because this will depend on whether it will be possible to attract outside funds. You can try taking out a bank loan to promote your startup.
The main advantages of this investment option:
- complete freedom in decision-making and strategic planning;
- the possibility of starting a business with a small initial capital;
- high profitability in case of success and independent distribution of profits.
However, a potential student investor should clearly realize that the risk of losing everything is very high at the initial stage. It will be difficult to sell such a business without losses and during its existence will have to invest additional funds in its development.
Startups
The essence of this method of investing is to successfully invest in someone else’s promising project and make a profit in the future. This requires special knowledge or complete trust in the founder of the project.
This can be a completely new idea that is not yet on the market or an improved concept of an existing business that can breathe new life into it. The potential income from such projects can be as high as the chances of losing every penny. Before investing in startups and becoming an angel investor, you should conduct thorough market analysis or order it from specialists. The main advantage of this investment option is the opportunity to be at the origin of a promising new company. The success of the project will also depend on whether you manage to unite a team of professionals in your field around yourself.
For more information about how students and others can invest, Sterling Savvy provides high-quality information about all things investing and trading.