College students often ask me: “What is the best way to start trading?”. They probably expect me to belt out learning resources and the best demat account. But I usually disappoint them with the following response.
- To make significant money from trading, one needs significant capital, which college students are unlikely to have.
- Trading involves a lot of time and effort; for most people, it does not result in meaningful rewards.
- Buy the index; that is all you need to do. No need to trade. No need to buy stocks. Just buy a Nifty or Sensex index fund.
- If you are in college and receiving pocket money, you can use all that you can spare to buy the index. Later on, when you start earning, you can diversify to a fixed income.
- Focus on upskilling. Learn more about emerging trends and new ideas. Spend one hour a day thinking about your future plans and how you can make your mark in the world. This will help you secure a well-paying job or help you enhance your income later on.
- A rookie investing mistake is to assume wealth is made from returns and “compounding”. This is not true. Wealth is made by investing more and more systematically. The more you invest, the more wealth you create (your return will not change, but your investment value and, therefore, so will your purchasing power).
- Therefore do not waste time on making big returns with small sums. Focus on making reasonable returns with large sums. That is the key to lasting wealth and achieving financial independence as early as possible.
Also read: At 22 how should I design my investment portfolio and invest regularly?