You may be wondering why as a student investing would be a good thing to do. You have little cash coming in and a lot of expenses going out. Could you not wait until you’re older, employed and no longer a poor student? Investing is one of those things though that pays you back, if you’ll excuse the pun, disproportionately.
Thanks to the compounding effect you will get a much greater return by starting now instead of putting it off even 5 years for example. You see it’s not just the amount you save over that period it’s the fact that your investment will have grown along with the stock market. And by re-investing your dividend income you can see your investment account grow even faster.
Obviously the markets can go down as well as up but over the mid to long term it’s fairly reasonable to assume they will rise. Just for the sake of an example the FTSE, one of the Worlds leading stock exchanges, at the end of Jan. 03 stood at 3567.4. Five years later it was standing at 5879.8 and that at a time of economic instability around the globe. Now as I said a moment ago markets can go down but don’t see that as necessarily being a bad thing.
Ok that might sound like crazy talk but that’s the reason you need to think like an investor. If you are in the market for the medium to long term you will see fluctuations – fact. But over time good quality stocks will always come good so if you can buy them when the price is low you will benefit far more when the market recovers.
If you decide to invest by making regular payments into a savings account you will notice the effect of compound interest even more. That’s because you will be earning interest on interest you have already accrued. By using compound interest you can get your money to work hard for you rather than you working hard for your money!
One of the other great benefits of investing while you are in college is that it gets you into the habit. After all if you have the discipline to save when your earning powers are limited you will almost certainly be able to do it throughout your life and reap the financial rewards. That really is a great reason to begin as a student investing right now.