Does the word “investment” conjure up images of men in suits, briefcases full of cash and people intensely monitoring the stock exchange on a busy screen?
Well, you don’t have to be the Wolf of Wall Street to start investing. And what’s more, you don’t necessarily need a lot of money to do so! In fact, as a student, you can still grow your money with what little you have, whether it’s to save up for the latest iPhone or for something bigger like studying abroad.
In this article, we show what you can do with just RM1,000 as a student.
#1. Fixed deposit (FD)
If you’re thinking of starting with something that’s relatively low-risk, fixed deposit is where you should turn to.
A fixed deposit, or FD, is a type of savings or investment account where you deposit your money for a predetermined period of time ranging from 1 month to several years. During this period, you are discouraged from withdrawing the cash out of this account. In return, once the tenure is over, the bank will reward you with an interest based on the amount of money you deposited.
Compared to your savings account, FD usually promises a higher interest rate at approximately 2% for a 12-month period as opposed to a mere 0.25% for regular savings accounts. However, compared to other forms of investments in this article, FD has a lower return on investment.
Risk/Return Profile: Generally low risk; low return
#2. Digital investment managers
So, you want to start investing but finance is not your best suit and investment jargon makes your head hurt. If only you could hand over your money to someone and have them invest it for you.
Well, that’s actually possible. And no, you don’t have to hire personal finance advisors. Instead, a set of algorithms will do all the work for you.
Digital investment managers (or sometimes known as robo advisors) is a service that incorporates technology to automate your investment portfolio. When you sign up, you’ll need to complete a set of questions about your investment plans and risk appetite. Subsequently, the algorithm will automatically invest your money, generally in Exchange Traded Funds (ETFs), which is basically a collection of stocks that represent an index such as the S&P 500 or the FTSE Bursa Malaysia KLCI. They will also periodically rebalance your portfolio based on what’s currently happening in the market.
In Malaysia, robo advisor platforms include StashAway, MYTHEO, Akru and Waheed. If your studies and college activities are making it hard for you to keep track of your investments, consider using these platforms for an easier approach.
Risk/Return Profile: Medium to high risk; medium to high return, depending on your portfolio
#3. Peer-to-peer lending (P2P)
What if we tell you that you can become investors to businesses and gain a profit in return even as a student? With P2P lending, you can!
P2P lending is when you lend money to businesses through online platforms. Initial investments can start from as low as RM50 and you can choose which businesses you’d like to invest in. The companies that you lend money to will then make monthly repayments together with interest.
This form of investment attracts medium to high returns from 10% to 18%. However, as companies that raise funds through such platforms are generally not as well-established (there’s a reason why they’re turning to individual investors instead of banks), there is a risk that they could default on their repayments, causing you to lose your money.
It’s recommended to choose reputable P2P lending platforms such as Funding Societies and Fundaztic. You can also check if the P2P lending platform you want to invest in has been licensed under the Security Commission Malaysia here.
Risk/Return Profile: Medium to high risk; medium return
#4. Equity crowdfunding
Equity crowdfunding is another form of fundraising that allows small businesses to obtain capital from individual investors. But unlike P2P lending that offers monthly repayments, equity crowdfunding offers return in the form of equity (or shares).
If you invest in equity crowdfunding, you’ll become a shareholder that has partial ownership of a company and can stand to profit if the company does well. The potential return from equity crowdfunding is higher too (it can be up to several multiples of your investment) as it’s based on how well the company does and does not have a fixed rate of return like P2P lending.
However, if the company fails to deliver, you’ll risk losing your shares and all of your money. Not to mention, it can take years to materialise your returns as you may only be able to sell your shares when the company exits (i.e. goes public or is acquired by another firm).
If you want to have a taste of what it’s like to hold shares at a young age, equity crowdfunding platforms such as pitchIn is a good place to start!
Risk/Return Profile: High risk; high return
#5. Amanah Saham Bumiputera (ASB)
As a young adult jostling through adulthood, saving up for a retirement plan might seem premature. But in reality, there’s no harm in putting aside some money as it can make a huge difference in 20 years.
Amanah Saham Bumiputera (ASB) is a unit trust fund for bumiputeras that’s supported by the government and managed by Amanah Saham Nasional Berhad (ASNB). ASNB pools the money from its investors (unitholders) and invests in a variety of assets. The profits are then channelled back to the unitholders via yearly dividends.
The maximum investment amount is subject to availability of units of the fund but you can start as low as RM10. ASB offers a relatively decent return of 5% to 10% with zero sales charges.
Risk/Return Profile: Low risk; medium return
Did you know that gold has the potential to hedge against risk or inflation? This explains why your parents and grandparents still keep the gold they purchased from the olden days because of its increasing value.
Instead of buying gold from Poh Kong for keepsake, you can now open a gold investment account and reap the rewards for its value. You can purchase gold based on the bank’s current selling price and sell them based on the bank’s buying price. The profit or loss you gain from gold is inherently based on the bank’s trading price.
Keep in mind that gold investment accounts don’t have an interest payout. Instead, what you gain from it is dependent on the fluctuation in the value of the gold itself. This investment has a high risk as it’s exposed to market forces and subject to gold price fluctuation but you may reap a high return if market conditions are in your favour.
Risk/Return Profile: High risk; high return
Bonus Point: Invest your spare change
If you don’t have RM1,000 as capital to invest, don’t despair. You can always start with saving and investing the spare change from your daily purchases.
Raiz is an investment app that automatically rounds up each transaction from your debit card to the nearest ringgit and invests the change into a unit trust portfolio (which comprises unit trust funds) based on your financial situation and goals. All you need is RM5 to start, easy!
We hope this article has shed some light on the investments you can make as a student. Keep in mind that every form of investment comes with advantages and disadvantages, so it’s best to run your research before making any decisions. All the best!