Investing lessons from your college life

“Life is a succession of lessons which must be lived to be understood.” – Helen Keller

Every experience in your life teaches you something; and some of them can teach you in more ways than one. Take your college life, for example. Even though you may not have realised it then, your time in college would have taught you more than just the technical know-how related to your degree. It would have given you lessons that you can use to invest better and smarter.

Here’s a list of the top 5 lessons in investing from college life:

1. Prepare for tests in advance – Cramming the last night before the exam may help you pass that test; but it won’t help you in the long run as you won’t remember much of what you ‘studied’.

Investing lesson: Similarly, investing in mutual funds at the last minute to quickly build wealth for your goals will only make it difficult for you to meet your goals. Instead, you should start now, and invest regularly benefit from the power of compounding, and to make sure that when the time comes, you’re well-prepared.

2. Make use of relative grading – While it’s important to see how much you score out of 100, it’s much more important to see where you lie with respect to your peers. Scoring 60 on 100 would seem just about average; but it’s worthy of an A-grade when the average of all the students in class is 40.

Investing lesson: The same way, don’t judge your mutual fund scheme merely on its returns. Compare it with its benchmark and peers – if it is containing losses and performing relatively well, then be sure to hold on to it.

3. Keep track of your grades – Checking up on your grades from time to time helps you keep track of how well you’re doing on the path to graduation, while reminding you of where you need to improve. But obsessing over them regularly only builds more stress.

Investing lesson: That’s why you should check up on your investments, but only about once or twice a year to keep track of their performance, and to make any changes, if required. Checking them every day will not do you any good.

4. Always be prepared – Surprise tests are possibly the most dreaded part of college life. They pop of out nowhere, asking you questions you don’t know the answers to. The only way to handle them is to always be prepared.

Investing lesson: In investing, it helps if you’re prepared for all sorts of contingencies by setting up an emergency fund. It would be a good idea to invest some money in liquid mutual funds for this purpose. This way, even if life throws up some nasty surprises, it should be easier for you to deal with them.

5. Opt for consistency, always – Scoring a CGPA of 9 in the one semester, followed by a CGPA of 3 in the next will only result in an average grade at best. What’s important is to perform well consistently.

Investing lesson: Don’t chase after funds simply because they topped the charts for a year. Check their track records and be sure to invest in only those funds that have performed well consistently. After all, a regular CGPA of 7 is preferable to a performance fluctuating between 9 and 3.