Is Trading Suitable for Students?

In some respects, it should come as no surprise that the coronavirus pandemic inspired a huge rise in the number of retail forex traders across the globe.

More specifically, licensed brokers reported month-to-month growth of between 25% and 50% in forex accounts in the three months through June 2020.

During this period (when lockdowns were enforced globally), trading volumes spiked by 300% overall, with this trend particularly prevalent in developing economies.

Of course, this trend was also inspired by the rising popularity of social trading, which now underpins a fast-growing market that’s worth in excess of $2.229 billion.

But is financial trading (and especially forex) suitable for students? We’ll take a closer look in the article below.

The Case for Student Trading (and the Appeal of Social and Copy Trading)

In many ways, social and retail trading are tailormade for students. After all, these disciplines are designed to be combined with full-time work or studies, while they can typically be deployed in markets with low capital requirements (we’ll touch more on these later in the piece).

In the case of social trading, for example, students can leverage existing software and dedicated platforms to observe and identify the best ‘master’ traders.

These will be experienced investors with a track record of success in a particular asset class or when leveraging specific circumstances such as a recession or bull market.

You can then learn more about their strategies and apply these to your own portfolio, making any desired changes to suit your existing knowledge based and wider investment philosophy.

Copy trading is a subset of social trading (although these terms are often and used interchangeably in error), and may be particularly appealing to novice students who are completely new to the financial and investment markets.

But how does copy trading differ from social trading? Well, although copy trading also involves observing master traders and their strategies, this technique automatically copies selected trades in your own account.

In this respect, copy traders minimise their own involvement and instinct, instead preferring to automate trades using dedicated software.

With both social and copy trading, you’ll be able to access platforms that boast expert market analysis, a collective knowledge base and shared educational resources. The latter can include direct trading advice and information about what causes inflation, along with insight into how markets tend to react to known and deterministic triggers.

These factors, when combined with the unique ability to learn and borrow from successful traders, earmark social and copy trading platforms as highly desirable among students.

What are the Best Assets for Students?

If you engage in social trading (or indeed to go it alone as a student financial trader), one of the key considerations is the precise investment assets that you want to target.

Ideally, these should be low risk and require minimal capital holdings. With this in mind,  here are some relevant options to keep in mind when getting started in the financial marketplace:

#1. High-Yield Savings Accounts: While high-yield savings accounts aren’t technically categorised as an investment, they do offer a nominal return on investment and offer virtually no risk at all. Remember, the base interest rate in countries such as the US and UK are also disproportionately high at present in the bid to drag down inflation, so you can currently access higher yield savings accounts and boost your returns accordingly. Cash also doesn’t lose dollar value, while by definition it’s the single most liquid asset in the world.

#2. Government and Corporate Bonds: Bonds are also relatively low risk, especially when they’re sold by governments. However, the same principle applies to corporate bonds too, while they’re also slightly higher yield and can be accessed with minimal capital holdings. Just be wary that corporate bond values can fluctuate in line with interest rate changes, which is worth careful consideration in the current climate.

#3. Dividend-Paying Stocks: Dividend-paying stocks are also popular and reliable options among students, who can negate the typically premium price of such equities through fractional share trading. While such stocks aren’t as risk free as government bonds, they typically appreciate incrementally over time and are considerably safer than high-growth equities. They also pay regular cash dividends that help to limit volatility and provide practical financial assistance to investors.