Top 6 Investment Ways for Students in India (2024-25)

Ask any experienced investor, and they will tell you that a critical component of compounding growth is the number of years invested. The higher the number, the higher the future value.

So, starting early is an excellent idea. However, 64% of younger Indians do not know where to put their money when it comes to investing. Around 72% of people do not know anything about asset allocation tactics.

As a result, the habit of investing has not developed among the younger generation.

To help with this, PNB MetLife offers the best investment options for students. These instruments bear less risk of capital loss, and you can begin investing even with a small capital.

Benefits of Investing Early as a Student

Everyone knows about renowned billionaire investor Warren Buffet. But did you know that he began his investing journey at the meager age of 11?

American financial journalist Roger Lowenstein has disclosed this in his biography of Buffet, called "Buffett: The Making of an American Capitalist." It is never too early to invest, and college students are at the perfect age to start investing.

Before we begin, the following are some benefits students can have when investing early.

More Time to Take Risk

Students can take more risks, like capital loss, and overcome them. They have the greatest asset, time, allowing them to overcome any losses they may incur. This also allows them to build more experience and get better with their money and risk management.

Learning for the Successes

If you start early, there is a chance that you will reach your financial freedom early too. Regular investing also develops better budgeting skills and saving habits. While learning to save is crucial for students, investing in small increments is also necessary. This is when you can learn from your mistakes and grow your financial knowledge about asset allocation, diversification, stock analysis, etc.

Better chance of compounding

The most obvious benefit of investing early as a student is allowing the money to grow over a long period. As you can be more aggressive with your investing, generating a sizeable portfolio over time is possible by investing in riskier assets, like high-growth stocks. So, if you are in college and have a part-time job, it is better to learn how to park your money and secure your future early.

Safe Investment Options for Students

But students considering investing their first deposit will not know where to put their money. Learning how to invest for students is a vital aspect of making your investments count.

So, here are the best investment options for students listed below.

Consider Starting with a High-Yield Savings Account

Everyone knows about the basic savings accounts in a bank, and many probably have one opened by their parents. Choosing a high-yield savings account can be an excellent start to the journey of investing for students. These accounts pay an interest much above the average 3% return of the national banks. Moreover, these accounts offer flexibility and high liquidity in times of emergency, just like a regular savings account.

Experiment with the Stock Market

When discussing investment plans for students, it may seem counterintuitive to discuss stocks, as they are highly volatile instruments. However, if you are a young adult, this is the time to experiment with the stock market and gather valuable experience. If you have been wondering about passive income ideas, investing a small monthly amount in stocks is an excellent way to generate passive income online.

Today, with many online platforms offering the convenience to make systematic investment planning (SIPs), this gets more convenient. You can start small, with the top blue chip stocks from the Nifty 50, or the Nifty index that represents the top 50 companies in India. Also, options like Exchange Traded Funds (ETFs), like gold ETFs, Nifty 50 ETF, or Nifty next 50 ETF. These are some of the safest bets on the stock market for beginners.

As you gain more experience and analytical skills, you can venture into the midcap and small-cap territories. Also, apart from appreciating value, many companies offer quarterly dividends, making it one of the best passive income investments.

Dip Your Toe in Mutual Funds

If you feel you are not smart enough to pick stocks, why not let someone do it for you? Mutual funds function by collecting a pool of money from retail investors. You can start a systematic investment planning SIP with as little as Rs. 100 in mutual funds. Of course, it is crucial to know how to invest students in mutual funds by picking the right one. If you are unsure of it, start with large-cap or index funds. At an average 12% Return, you can still generate a considerable corpus in the long run.

Mutual funds also allow you to invest in instruments other than equity, such as bonds, government treasury, commodities, etc. These experts buy and sell assets on your behalf as you hold on to the mutual fund units and later gain compounding returns on them.

ULIP

United Linked Insurance Plan or ULIP is a smart plan that offers the benefits of insurance and investment. While one aspect of the premium goes into the life insurance coverage, the other part invests in financial tools like equity, debt, etc.

Since students have a really long investment horizon in front of them, this investment cum insurance instrument can offer greater flexibility. It is more cost-effective for students compared to other investment options.

Bonds

It is understandable that the stock market for beginners is not always a suitable place because of volatility and unpredictable returns. So, one of the best investment options to consider for parking your money are bonds.

Bonds are corporate or government debt securities issued by companies or a government as tradeable assets. These offer a fixed interest at a fixed tenure, making them one of the best fixed-income investments. By investing in bonds, student investors can diversify their portfolios while also adding a stable source of passive income.

Fixed Deposits

Fixed deposits are popular safe options, although not the best passive income sources, as they often do not generate inflation-beating returns. But when you are young, you do not need to worry about such details of microeconomics. Keeping your money in a fixed deposit is much better than in a regular savings account. Plus, the recent hike in bank interest rates makes it the perfect time to put some money in these deposits.

This way, you can also build your emergency fund, and by the time you start earning after graduation, you will have a much stronger footing.

How to Get Started [conclusion]

The financial schemes mentioned above are only a few viable investment options for students. But there are much more.

Also, developing a solid investment strategy is crucial in these tender years.

For instance, the stock market for beginners can be a dangerous playground. If you are not confident about picking the right stocks, you can seek help from a robo-advisor to help you with passive income streams. These are automated and algorithm-driven financial planning digital platforms that require no human intervention to perform.

These tools require low fees, and lesser minimum balances while providing tax-optimized investment options for students. Some reputed robo-advisors in India are ArthaYantra, FundsIndia, and ScripBox.

These are tools that help automate the investment process and help you diversify the portfolio without hassle. Signing up for one of these services is easy, and they do not charge much.

Understand Different Types of Investments

It is also essential to understand how different investment instrument works before you park your money in them. Depending on these types, you can plan your finances. For instance, investing in equity increases your portfolio's volatility and promises greater growth.

Debt instruments, like fixed deposits and bonds, offer a fixed income but at a lower return. Insurance cum investment instruments, like ULIP, allow you to take a hybrid mode and gain the advantage of both equity and debt.

So, depending on your financial goals and how long you can stay invested, it is essential to choose wisely.

Basics of Investment

• Have a clear goal in mind.
• Understand the risks.
• Avoid being too emotional, especially when buying or selling stocks.
• Gather information about equity instruments, like stocks and equity mutual funds.

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