Why students should consider investing

Investing while at university may seem early. Yet it brings real benefits:

• Start the journey early: Time is one of the most significant advantages for compounding growth.
• Learn practical money skills: You gain real-world experience managing investments.
• Feel empowered: Handling your money builds confidence and independence.
• Future cushion: Even small gains now become useful after graduation.

Understanding risks and rewards

Every investment carries risk. Prices go up and down. Students often have a long time ahead before needing the money. This allows handling some risk. Yet it is vital to stay informed and avoid risky bets.

Choosing your investment goals

Before you start, pause and think about your aim:

• Buying a car? Short-term goals often mean safe investments or savings.
• Graduating soon? You may not want your money exposed to risky swings.
• Looking longer-term? Retirement savings or a house deposit might benefit from investing.

Low‑cost accounts are suitable for students.

1. Stocks and Shares ISA

• Tax-free growth and income
• You can choose funds, ETFs, or shares
• The annual limit is £20,000

2. General investment account

• No tax shelter, but no ISA limit—applicable if ISAs are full
• Watch for tax on gains and dividends

3. Pension contributions

• Personal pensions offer tax relief
• Money is locked until retirement age—long-term only

Which investments make sense for students

Select options that are easy, affordable, and low-risk.

Index funds and ETFs

• Track the whole market
• Very low fees
• Built-in diversification

Global equity funds

• A mix of UK and world stocks
• More diverse than UK-only options

Themed or ethical funds

• Supports areas like green energy or technology
• Good appeal and may match personal values

Bond or mixed funds

• Offer greater stability than shares
• Useful for balance and can reduce volatility

How much to begin with

You don’t need much to start:

1. Lump sum

Even £100 invested at once can grow over time.

2. Regular savings

Automated monthly payments of £20–£50 build steadily.

3. Dollar-cost averaging

Investing in small, regular amounts helps reduce timing risk.

Balancing growth and risk

Your age and time horizon matter:

• 0–5 years: Be cautious—avoid high volatility
• 5–10 years: A 50–70% stock allocation can be effective
• 10+ years: A higher stock mix (70–90%) may deliver growth, but swings remain

Define your comfort level and adjust accordingly.

Building a simple student portfolio

Here is a student-friendly mix:

• Global index fund/ETF: 60%
• UK index fund/ETF: 20%
• Bond or mixed fund: 15%
• Ethical or thematic fund: 5%

This blend strikes a balance between growth and safety. Feel free to adjust the percentages based on your comfort level.

Tracking and rebalancing

Markets move. Your portfolio may drift from your target mix. Rebalance every 6–12 months:

• If shares grow too fast, sell some and buy bonds.
• If funds drop, and you believe in the plan, buy more.

Rebalancing keeps your strategy aligned.

Avoiding common mistakes

Watch out for:

• High fees: They chip away at returns
• Chasing trends: Avoid hot stocks without a plan
• Overtrading: Frequent trades harm results
• Ignoring taxes: ISAs help, but taxes still matter
• Letting emotion rule: Stick to your plan, not your fears

How students can learn while investing

Use your student phase to learn innovative practices:

• Track your returns: Check progress quarterly
• Read books or blogs on investing basics
• Follow financial podcasts or YouTube channels
• Join finance or investing societies at university
• Discuss with peers: their insights can help you think smarter

Today’s learning helps build confidence for future decisions.

Tax and legal notes

• Dividends under £1,000 are tax-free
• Capital gains allowance applies to general accounts after ISAs are full
• Pension contributions provide relief, but are locked until later

Understand the rules so you keep more of what you earn.

Real-life example: Sarah’s student journey

Sarah is a 20-year-old student starting work on graduating. She starts with:

• Monthly £50 into a global ETF (index fund) via ISA
• £100 lump sum in a UK equity fund
• Year-end review: fund split is tracked
• Annual rebalance: adjusts a bit toward bonds

After three years, her surprise: the money has grown, and losses have been manageable. She now feels ready for larger goals, such as a house deposit in 5–10 years.

When to consider professional guidance

For most students with basic funds IN ISAs or simple accounts, DIY works. You may need financial advice if:

• You receive a large lump sum
• You own a family trust or inheritance
• You want complex investments like options or property
• You need help with tax planning

Always check the adviser’s credentials and fees before starting help.

The role of a long‑term mindset

A key trait of investing success is patience:

• Ignore daily swings, focus on long-term growth
• Stay calm in bad periods—markets bounce back
• Keep contributing even when returns dip
• Think years, not days—your money needs time to grow

Keeping healthy investing habits

To stay smart:

• Automate savings into your account
• Check your plan semi‑annually
• Keep learning regularly
• Ignore flashy promotions
• Focus on low costs

Healthy habits now build strong results later.

Community and support

You don’t invest alone. Use:

• Universities: investing and finance societies
• Online forums: student-friendly investing groups
• Podcasts and blogs: for students and young investors
• Peer groups: share experiences and insights

Support helps keep motivation and learning on track.

Final thoughts

Investing while studying gives you a head start. It builds money skills and creates a valuable financial base.

With clear goals, a simple portfolio, low fees, and a long-term attitude, students can grow wealth steadily.

Start small, stay informed, and invest in yourself today.