University can be a time of financial uncertainty in the lives of young people. Fresh from relying on their parents, in charge of their own finances for the first time, managing your own money can seem daunting. Add to that, the fact that you may be beginning to rack up student debt as the bills for tuition, accommodation and books get paid, and you would be forgiven for feeling as though your newly acquired financial freedom is in free-fall.
Try investing
One smart way to counterbalance this is to invest some of your money whilst you’re still at university. It is a universal truth amongst wise investors that it is the longest investment periods that offer the safest and most lucrative returns. This means that the earlier you begin your investment life, the better you are likely to fare and the more you are likely to make whilst minimising any potential losses. Most people will begin their investments later in life when they have more financial sense and stability. Get ahead of the curve and secure your financial future by investing whilst completing your studies.
Of course, if you are in debt it is best to pay this off before you begin investing unless you have been able to take advantage of an interest-free offer for the duration of your studies. You may have a part-time job whilst you’re studying, putting even just a small sum of this aside for your future may mean that you are able to buy a house or a car with the proceeds one day.
What kind of investments?
That said, with your focus being on studying, you need investments that are easy, straightforward and reliable with a high likelihood of a good return. So what are some easy investments that university students can make?
At this stage, you need to decide what kind of investor you are, high-risk investments offer the largest returns but you also must be prepared to incur losses. Safer investments do not fluctuate as much so may be better for you if you are more cautious as a person.
Work out how much you are able to invest and you are ready to build your portfolio. You might want to choose a managed investment option to allow an expert to do all the legwork in terms of investment strategy in return for a fee. If you are busy with your studies or not financially-minded, this could be a good option to save yourself time and effort.
A diverse portfolio will minimise the risk of loss, and be sure to keep up to date with your advisor as to how your investment is doing.
Stocks
Stocks involve owning a share of a company, you then earn money annually through dividend payouts or through capital gains when you sell your shares for a profit. It is recommended for young investors such as university students to focus on the stock markets as they are good returners over a long period of time.
Buying stocks individually can be quite expensive, with some transaction fees reaching $25. However, if a student is confident in their ability to make wise and prudent investment choices, this is certainly an option to avoid management fees and have more control over your investments.
Monthly Investment Plans
One way to gain access to the market is to use a Monthly Investment Plan. Offered by Maybank, OCBC, POSB and Phillip Share Builder, these plans allow investors to invest in a specific period. Using dollar-cost averaging to determine what you buy, sell and what your returns are, this is a less labour-intensive way to invest as a student. It is also cheap to start and relatively stable. Beginning from just $100, they will manage your investment with a transaction cost of just 1%.
ETFs
ETFs or Exchange-Traded Funds are a great option for student investors. They are a fund made up of bonds, stocks and commodities that are traded on the stock exchange. A great example is the STI ETF on offer from Nikko Asset Management which will give investors access to 30 of the biggest blue-chip companies on the SGX.
Lucky investors who bought STI ETF in 2002 would now be sitting on overage returns of 7.49% over the years.
Bonds
Perhaps the most low-risk, stable and predictable, bonds allow you to lend money to a company or government body for full repayment at a later date. Whilst the money is owing, you receive interest on your loan. Your options in Singapore include Singapore Government Securities, Singapore Savings Bonds and Singapore Corporate and Retail Bonds.
Ideal for the risk-averse who want low returns and reliable interest payments, this works for some students who have the capital to invest whilst they are still at university.
Property
It is possible, even as a student to invest in property if you possess the capital to make an initial deposit. The Singapore property market is a great place to invest thanks to the rising population and increasing land scarcity.
The bonus is of course that you can live in your investment whilst you wait for it to mature. That said, you will have to manage the property including paying for repairs and finding suitable lodgers if you do not plan to live there.
REITs
Another worthy option for students is REITs. Again they allow you to invest in a professionally managed portfolio and receive regular dividend payouts from property investment without the need for a large capital sum upfront.
However you choose to invest as a university student, be sure to seek financial advice before making any decisions that may negatively impact your future.
