Let me congratulate you first on your desire to know how can you start investing in your life at such an early phase. If you don't know how investing early can make a big difference, I will suggest you go through my previous post:


Now, I assume you are already versed with the 8th wonder of the world i.e. “The power of compounding.” As college students, we generally don't tend to have a lot of capital to invest. I have been through that stage and I know very well how tough can it be to manage all the expenses through limited resources. In this post, I will try to help you start your investment journey.

First of all, let us see all the primary resources through which a student can generate capital:

  1. Internship stipend

  2. Freelance contracts

  3. Prize rewards

  4. Pocket money

These are the 4 most potent ways though there can be more ways through which you can generate your capital.

Now let's say, in a month, you get ₹5000 every month to spend on your daily expenses. Use the 50/30/20 rule from the book “All Your Worth: The Ultimate Lifetime Money Plan.” The rule is very simple yet the most practical out of the bunch to manage your income. As per the rule, divide the income into 3 parts - 50% of it goes to your needs, 30% goes to your wants, 20% is for your investments.

Decoding the 50/30/20

As already mentioned, 50% of your monthly income/capital should be spent exclusively on your needs. Needs are those things that are essential for you and cannot be avoided. This can include paying your internet bills, stationery items, food and similar obligations that must be fulfilled.

30% should be for your wants. Wants include the commodities that might provide you with a sense of luxury or comfort. This can include your OTT subscription, clubbing, dining out, shopping for a new back cover for your phone, a new phone, spending on your movies and hobbies and a lot more of your seasonal shopping, grooming and whatnot. As you can make out, the list of wants is infinite and if not regulated well, can destroy your wealth. Hence, nothing more than 30% of your revenue should go towards your wants.

While needs and wants provide for your present, the investment bucket will increase your net worth in the long term. Hence, this should never be ignored. At least 20% of your monthly income should be devoted to your investments. If you are having the self-control and discipline to control your wants, you can get more capital to invest. This 20–25% will determine how rich are you in your 30s and time ahead.

Where should a student invest?

In my previous post, I stated that “Investment means making your money work for you.” The invested money if done with smart choices, will generate a lot of capital for you. There are a lot of assets where one can invest their capital viz. stock market, bonds, mutual funds, fixed deposits, crypto, real estate and a lot more.

But as a student, which is the most feasible investment?

I will say, as a student, you will not have a lot of time to devote to your investments. Lectures, practicals, projects, gym/sports or other sorts. The stock market requires a lot of assessment or analysis else you will end up losing money. Crypto is very volatile and the future is uncertain with the Government of India on the verge of either regulating or banning it. Bonds and real estate require a huge sum of money which is practically not possible for a student. That leaves us with mutual funds.

What is a mutual fund?

A mutual fund is an investment scheme that is maintained by an asset management company and these are regulated by SEBI. A mutual fund collects money from investors like us and invests it into different assets like stocks or bonds. Each mutual fund scheme has a fund manager who analyses the market and decides where they can invest the money of investors for better returns. They make our job easier as we don't have to spend our time and resources on deciding which stocks should we invest in and similar.

The biggest advantage is you can start investing in certain mutual funds from as low as ₹100.

There are different types of mutual funds in our country viz. equity funds, debt funds, hybrid funds. It might be a bit confusing for a new investor. In my next post, I will explain in detail on what are the different types of mutual funds and which one can be the best option for a student to invest in. Stay tuned till then. If you liked this blog, consider giving an upvote, if you learnt something new, share it among your peers.

Let me know your thoughts in the comments.