Note: I’m no investment expert, just someone who took some time and researched different paths available for someone looking to start investing in their future. Don’t take my word for everything, put some time in and research a bit yourself as the market is always changing.
I’m one that often researches everything; maybe a little too much sometimes even. This time, I have decided to try and tackle investing as a college student and avenues of long-term investment. I feel there is plenty of advice given, such as to invest early, but I kept finding different information on exactly what I should do to invest and how I should invest. I kept thinking to myself, “why isn’t there just a guide?” or “just tell me what to do to invest as a college student..”. And with this, hopefully, I will save you some time.
Before we end up going too far into this discussion, there are a few important questions that need to be answered: Do you want to just “throw” your money at a company to let them manage it? Or manage your portfolio yourself and make those hard decisions? Investing as a college student can be hard, but after reading this; hopefully you will have a little direction.
There are multiple investment opportunities available for someone to get into the market. Each comes with their own benefits and risks, though. With this in mind, it depends on how much risk you are willing to accept along with how much time are you willing to spend.
These options include three big areas: bonds, stocks and mutual funds. There are also other investment areas such as FOREX, Real Estate, and Gold, but they usually come with a high risk and high reward. Therefore, I can’t recommend dabbling in those areas as a college student who is looking to invest.
Bonds are the safest way to gain a little money. These are categorized as a fixed-income security, and usually one is lending their money to a company or government for interest in return for the amount you lent out.
Bonds are categorized as risk-free investments; they come with a high level of safety and security. With this safety, though, they bring a much lower return. Depending on your goals, it may not be worth the investment in the end.
Stocks essentially allow one to become part owner of the business(in a way…). You have a stake in the company. With this stake, this brings the ability to receive dividends allocated by the company. Most stocks will not give out dividends, though, and you have to hope that it will increase in value.
Determining that is another story though and requires a lot of research before investing. It’s not as easy as just picking one and watching it just grow. You have to pay attention to the market and news regularly to be sure that your investment is safe.
Stocks are very, very volatile and will change often. You have to be ready to lose all your money or be ready to pull all your money at a moment’s notice. If a company is in a scandal, or simply having a bad quarter, the market will react and your stock will either grow or drop drastically in moments. Not ideal for a college student who may be in classes during the day.
With the new age of supercomputers, though, stocks are being traded automatically each and ever day. Therefore, you may end up losing thousands before you even notice due to these supercomputers. Think you’re ready to risk it? You may want to think again after reading this short story.
Stocks can bring you some serious money, though, and people make a full time living doing so. With this in mind, these traders pay attention to multiple areas in the market including World News, quarterly reports, statistic’s in the stock itself and more. It’s a full-time job, and I don’t think one should just jump right in; especially as a college student.
There also is day trading, but that’s another topic in itself.
Getting Started With Stocks
Over this past summer, (summer of 2016) I’ve dabbled in a bit with stocks, and I had a great time for the most part. With this, I didn’t need to do much to get started, and it was incredibly easy. You could even say scary easy. Simply head over to the App Store and download Robinhood (available for Android and Apple). From here, you will need to link up your bank account, and you can start trading within moments.
This app allows for free trades, and there isn’t much of a catch that I’ve noticed. Robinhood has allowed me to get my “feet” wet without taking a huge dive or risk and experience what buying & selling stocks is all about. Don’t get me wrong, though; it can be scary watching your money come and go each day along with “praying” it would go back.
Check out my longer post about trading stocks as a college student and a bit what I experienced in my “short trading career.”
Arguably one of the safer ways of investing is mutual funds. When you buy into a mutual fund, you essentially are buying into a large pool of stocks. This pool is then managed by professionals who constantly look at the market and move stocks accordingly. Most mutual funds will average roughly 3-12% back on your investment. Note: 12% is not common, expect anywhere between 5-8%.
Mutual funds also will have their own specialty and strategy. For example: focusing on large stocks, bonds, bonds and stocks, government bonds and more. From here, there are different risks associated with mutual funds based on the strategy used.
Most funds will provide information on how well the fund has done in previous years though too.
With mutual funds, you can invest without having to spend a lot of time or effort. This is due to allowing the professionals who are experts in the market. I currently have the majority of my portfolio in mutual funds due to their ease of use and reliability.
Getting Started With Mutual Funds
Mutual funds are relatively easy, and I’m a huge fan of Vanguard for this purpose. Just sign up over at Vanguard, and they will guide you in the right direction to setup your investment. Some funds will require certain minimum investments, while others will have none all-together.
In my opinion and as a college student looking to invest, I feel mutual funds are the safest way of investing. Mutual funds are managed by experts who regularly watch the market and try to make the best decision for you. There still may be some risk, but that comes with any investment. Therefore, make sure you make a solid decision and put a little research in before making an investment.
Check out my other tips on investing and getting a solid portfolio started for your future.