Make provisions for your old age when you're still a student? Such foresight is usually rewarded, at least if the respective investment actually works out over the years. No one can guarantee this with cryptocurrencies, nor can it be guaranteed for ETFs, stocks and the like: after all, an investment always involves risk. But it could be worth taking the risk as a student.
If you still have money left at the end of the month, why not invest it?
Of course: In reality, most students will have a lot of money left over at the end of the month. However, if you can make ends meet quite well with BAföG , a part-time job or support from your parents' house, any money you don't need shouldn't just be left in your savings account - it generates no or almost no interest, but in any case none above that Inflation rate. This is important: Your investments must not only generate a return, but a return higher than the inflation rate - this is the only way you can actually increase your purchasing power.
Cryptocurrencies are known for their high returns as well as their high risk - as a look at the Bitcoin price on Bitvavo makes clear. The volatility, i.e. the “up and down”, of crypto prices is unique on the capital market. Hardly any other asset class is so volatile, and no other investment has happiness and misery so close together. This is exactly what can be useful for students: Because of the sometimes huge returns, you don't necessarily have to invest a lot of money in the world of cryptos to get a hefty sum out of it - at least if the investment works out.
Here's a current example: Solana's price has quadrupled in the past 12 months. Anyone who invested 100 euros a year ago now has more than 400 euros. Particularly practical: Due to German tax law, the sale of the cryptocurrency would be completely tax-exempt after a holding period of over 12 months. This could be important for you if you have other investments and capital gains, as the returns from cryptocurrencies will then not affect your tax allowance of 1,000 euros.
What is the best way to proceed as a student?
The most important rule first: Never invest money that you need immediately. To trade or invest with the upcoming rent or soon-to-be-due tuition fees? This is a very stupid idea! You initially only invest the money that you could theoretically lose without the loss causing you significant problems, especially in risky and volatile investments such as cryptocurrencies.
You should also look for a cheap broker/crypto exchange. Fees can have a significant impact on returns, especially with the small amounts that students have to invest. The best way is to trade your cryptocurrencies completely or at least almost for free. Also look for a reputable crypto exchange, especially if you do not want to transfer the purchased cryptocurrencies to your own wallet after purchase, but rather store them with the provider.
Then it's time to choose: It's important to pay attention to diversification here. A big advantage with cryptocurrencies: They are all more or less infinitely divisible, which means you can efficiently distribute a very manageable sum across several "shoulders" (cryptos) - which in turn reduces your risk. Even if one cryptocurrency does poorly, it may be offset by another cryptocurrency that is doing much better. Ideally, your crypto portfolio has around 6 to 12 values - from this point on, the maximum degree of diversification effect has been reached.
Tip: The long-established cryptos with high market capitalization are considered to be less risky than alt-coins with small market capitalization. As a beginner, it is best not to invest in “small” and unknown alt coins. Your money is safer in the 30 to 40 most valuable cryptocurrencies.
The great strength of cryptos: With small student money there are potentially big profits
Already knew? In Europe, a quarter of students invest in cryptocurrencies, as DerStandard reports. In view of the recently falling inflation and positive price developments in the crypto world, the number has probably even increased since then. For students who want to invest in crypto for the first time, considering the Bitcoin halving next year is a good time - but of course there is no guarantee of returns.
Photo by micheile henderson on Unsplash
