How I Invest My Money as a 20-Year-Old University Student Living In London

And no, it's not daddy’s money.

Photo by Emil Kalibradov on Unsplash

My parents aren’t rich, I’m not a trust fund baby and I pay all my bills on time. Yet, I still manage to invest a reasonable amount of my money in various ways and I’ve built a five figure portfolio in under two years while still studying towards my A-levels and my degree.

So, how do I do it?

This article will cover both tips on how to make sure you have money to invest, even if you’re a student without a full time job living at university, as well as a few pointers as to how I invest my money to build up my portfolio little by little.

Don’t Live Outside Your Means

Even if you’re living in one of the most expensive cities in the world, it’s very possible to spend relatively little money without having to be ‘cheap’ and walk around on the streets picking up pennies. You just need to have enough to put aside a little money each month or each week to plan for your future.

Firstly, and perhaps most obviously, I share a house. Of course I do , I’m a student. But even after finishing my degree and beginning full time work, I don’t plan on changing this fact.

By sharing responsibility for the rent, the bills and certain household necessities with other people, you can live in a much nicer property in a much nicer area all while spending less than you would on rent if you lived alone in a studio apartment.

I could probably afford to do this if I wanted to, but that would be a poor financial decision and I’d end up living way out in the Styx and spending more money on public transport than most people spend on a car.

Just as important as this though, is making sure you’re getting the most value for your money. Now, this doesn’t mean you should buy based on price. It’s far better to consider the value of a purchase than just how much it’ll reduce your bank account.

Buy cheap, buy twice.

If you’ve never heard that before, push it as far as you can into your brains and get those neurons firing. It’s one of the most important phrases you’ll ever read.

You see, if you just buy things you need based on their price, you’ll probably end up spending more money to replace them when they inevitably don’t provide anything of value than you would if you just bought better quality things in the first place. This doesn’t always apply of course — a 43p tin of tomatoes will taste much the same as a £1.00 tin of tomatoes when you cook it into a lasagne — but you need to keep it in the back of your mind at all times.

Think about buying a car, for example. It’s much better to buy that five-year-old Suzuki with 80,000 miles on the clock for £2000 than the 2002 Volvo with 150,000 for £1000.

This doesn’t mean you can’t treat yourself though. It’s important to reward yourself with a night out every now and then or that new coat you’ve been staring at for months now. Just not too often, okay?

Invest Consciously And Keep Things Diverse

Just for the record, the following (and all of the content of this article, for that matter) is not financial advice. It’s an account of my experiences over the past couple of years of investing.

I don’t just buy stocks.

What I mean by this is that I don’t just buy lots of individual stocks. I like to put my money into what’s known as ETFs, or exchange traded funds, which are essentially a conglomeration of a bunch of different stocks that you can buy into all at once. This means that if the stock prices of one of the companies in the list falls dramatically, you’re not going to lose all your money.

On the other hand, you’re also not going to make as much money from ETFs, but if you don’t have hours to research the hottest new trends and just want safe investments that will reliably beat inflation, they’re a great way to go about that. If you’re in the US, one of the most well-known ETFs is the S&P 500 (VOO) and is an index of the most valuable 500 companies traded on the New York Stock Exchange. While I can’t buy directly into VOO from the UK, I can buy a Vanguard fund like VUSA which tracks the same 500 stocks.

I do, naturally, also buy individual stocks, and while I won’t go into too much detail about which ones, I will share a few tips that I’ve picked up over the past couple of years.

  1. Blue chip stocks are good. Don’t be put off by high prices like $3400 for a share in Amazon or a whopping $446,000 for a Berkshire Hathaway Class A stock. You don’t have to invest that much to get in on these companies. Most brokers will allow you to buy fractional shares, meaning you could buy just $10 of AMZN if you really wanted to.
  2. Buy for dividends as well as growth. Some companies pay their shareholders in cash every year as a ‘thank you’ for investing in the company. Lots of fast-growing stocks like Tesla (TSLA) won’t, but Apple will give their shareholders around 0.5% of their investment back each year. This doesn’t sound like a lot, but the share value is also likely to grow too, and some companies like Rio Tinto (RIO) have a dividend yield in excess of 10%!
  3. Only invest money you can afford to lose. Even though you’re unlikely to lose everything if you mostly buy into ETFs and don’t keep all your eggs in one basket, stock market crashes can happen and they can hurt your savings. Just ensure that if suddenly all the money you have in stocks disappeared tomorrow, you would still be able to survive.

Of course, there are other investment options like crypto, bonds and real estate, but I’ll save those for another article.

Get A Job

I know this one is obvious, but even if you’re a hardworking student, getting a job over the summer is a great way to build up some capital to invest. You don’t need to work full time — I don’t. You just need enough that you have some surplus cash to put away in as an investment in your future.

If you’re a student, I highly recommend seeing if there’s work available at one of the bars or shops run by your university. They usually offer very flexible working hours so you don’t need to get too stressed if you’re bogged down by a heavy workload. You also get the benefit of meeting other students and maybe finding some financially-savvy flatmates for next year!

Consistency Is Key

It’s really important to make a habit of investing little and often. I’m not saying you need to pour £100 a day into your stocks and shares, but by building your portfolio little by little you’ll soon realise just how much your savings can grow and you’ll start to think about purchases before you make them.

Do I really need another pair of shoes?

Probably not. That money can be put to work so that you can start earning in your sleep.

For example, I put £200 every single month in to a Help-to-Buy ISA, which is a tax-free savings account that helps me save towards a deposit on my first house. This little habit has helped me become more money-conscious and get to grips with what saving means.

Most Of All, Just Be Sensible

As you’ve hopefully seen from this article, growing your net worth isn’t difficult if you’re careful about it. However, there’s no such thing as a ‘Get Rich Quick’ scheme that actually works, so just be patient and join me on my journey to a £1,000,000 portfolio!

I hope you’ve enjoyed this little insight into my life. I love to write and plan on creating more content like this in the future, so please let me know what you thought!

If you’re into your finance and have some technical know-how, why not check out the finance tracking app I wrote in Python?

See you soon!