Best Ways to Invest your Money Wisely as a College Student
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If you are in college and you are thinking of the right time to start investing, now is the best time to do so. Being a student offers you the opportunity to start investing in your future early.
The good thing about this is that you can start with a very low amount of money and you can make inevitable mistakes earlier and learn from them on time. All these without losing a large sum of money.
This post will guide you on how to invest the right way to secure your financial future, even before you start building your career.
Top Investment Options for College students
1. Invest in Unit Trusts
One of the best ways to invest as a student in college is through unit trusts. A unit trust is a fund that pools money together from different investors and invest in different financial assets like government and corporate bonds and bills, commercial papers, cash and bank deposits, shares, among others.
You can invest in the following types of trust funds:
Equity fund: An equity fund invests primarily in listed equities for firms like Safaricom and KCB. This fund is suitable for investors looking for medium to long term capital growth in their portfolios.
Balanced fund: This fund offers investors a good amount of current income and long term capital growth. This would be achieved by investing in a diversified spread of equities and fixed income securities.
Money market fund: This fund invests in liquid interest-bearing securities that have a maturity of less than 12-months. These securities include bank deposits, and other short-term money market instruments like short- dated treasury bills and commercial papers.
You can invest in unit trust funds from financial institutions in Kenya like ICEA Lion, Zimele Asset Management, Britam, Sanlam and Cytonn.
Investing in trust funds offers you benefits like earning a higher annual returns of at least 10% compared to saving with banks, easy access to withdraw your investments, proper management and regulation for your assets, etc.
2. Invest in Real Estate
Over the years, real estate has been a profitable investment option for investors. If you are looking for a profitable long term investment option as a student, your best bet would be to invest in real estate.
There are different ways of investing in real estate: such as: buying investment properties including land, residential, commercial, retail, industrial, and mixed-use developments, buying publicly traded Real estate investment trusts (REITs), buying real estate-related companies stocks and mutual funds.
Before you invest in any type of real estate property, you need to conduct due diligence on the property and all the parties involved, consider legal restrictions associated with it and stay informed about the latest developments in the real estate industry.
Investing in real estate offers you high returns, a hedge against inflation, amongst others.
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3. Invest in Stocks
Another great investment option is stock. If you invest in a stock, you're buying into a small percentage of a company with the hope that the business will increase in value over time, making your small portion of it more valuable over time as well.
You'll earn profits through capital valuation and the dividends from the stocks. Unfortunately, profit isn't often guaranteed by investing in a company's stock. The company could also decrease in value after you purchase their stock. Before buying a stock, you need to research and find the best companies which have given good returns over the years on their stocks.
4. Create an individual Retirement Account (Roth IRA)
A Roth IRA is a retirement account that provides tax-free growth and tax-free withdrawals in retirement. This may sound funny to you as a student but this is a great investment option for students to hold their money for a long time. If you have an IRA from a past summer job or other employment, transfer it to a Roth IRA so it can accumulate interest without tax liability for you.
When you invest early in an IRA, you'll reap the benefits of compound interest on your investments over time.
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5. Open a Money Market Account or a Certificate of Deposit
If you’re a student who is scared of losing money in an investment, consider opening a money market account or getting a certificate of Deposit. A certificate of deposit is one of the safest investment alternatives around. CDs will pay you a preset rate of interest in exchange for giving your money to the bank for a specified time. These investments can be a good place to stack money that you don’t need until a specific time in the future.
A high-yield Money Market Account or Certificate of Deposit offers a higher interest rate than a regular savings account, as long as you don't touch the funds during a given period. You can open an MMA or CD with a bank, credit union or registered financial firm in your locality.
Investing early can be a great decision, if you find the right investment that suits your goals and capability. Don’t feel rushed to get into any investment just because you think you should. Make sure you carefully consider and make an investment that feels right to you long term and makes sense with your current budget.
