College is a great time to start thinking about the future. Indeed, you are working on personal development and acquiring a future profession. But investment is another factor to consider. In this guide, you’ll find all the fundamentals and tips on how to start investing as a student.
Why Invest During College?
Some might argue that it is not a great time as many students live on a budget and have little experience managing finances. However, it is an opportunity to learn those skills and earn money to cover the loans or housing.
After all, investment is a long-running game. The earlier one starts, the higher the profits will be. Also, there is an argument about time. This activity should not be approached as gambling. It requires planning and research, which can be time-consuming.
Students are already loaded with coursework and college assignments. This is a valid point. However, if a student is interested in growing assets, there is always a simple solution. One can opt for a paper writing service like WritePaper.com to have more free time for other responsibilities. It is a professional academic writing platform that delivers expert assistance to every student in need.
Experienced professionals offer writing, proofreading, and editing help with all types of college papers. This is an excellent way to keep up with the curriculum even if you lack time or confidence in your skills.
The reasons to start making investments as a student are:
- Opportunity to grow your funds;
- Meet financial goals;
- Gain valuable experience;
- Meet new people and build a network;
- Ability to establish financial independence and security.
Sure, any investment comes with some sort of risk. But with enough research and consideration, it is possible to meet all your objectives.
What To Know Before Investing
Do not rush into the game. Start by following simple tips, namely:
- Evaluate why you are doing this and what are your short-term and long-term goals (buy a house or retire early);
- Figure out what you can afford. Do not spend what you do not have or cannot afford to lose;
- Draft a realistic strategy. If you do not have a huge capital to begin with, do not expect immediate income. Consider passive options like low-cost and well-diversified index funds and exchange-traded funds;
- Learn as much as you can about options and risks;
- Make it a regular practice;
- Remember that it is okay to play safe.
Before one starts, one needs a brokerage account. Then, you can go to a traditional broker, use an investment app, or choose a Robo-advisor. The last option is the most affordable. Some of the solutions are even free, like Q.ai.
Top Field to Invest for Students
Savings and Certificates of Deposit
This is probably one of the safest ways to manage money. At the same time, the revenue won’t be immediate or tremendous. Investment is not limited to trading stocks. You can also store money safely while gaining interest rates.
This is a good start if you have money to put into a savings account or certificate of deposit.
Individual Retirement Account
An IRA is another safe way to manage finances. Retiring requires a lot of money, so starting as early as college is great. However, it is mainly for students who combine education with a job because you need reportable income to open an IRA. Then, you can start saving money from your salary for the future.
IRAs also give tax advantages compared to regular brokerage accounts. With it, you can defer taxes on any profits or dividends, which is an advantage. You can also deduct contributions from the taxable income you have.
Passively Traded Funds
This is a simple way to begin investing. Low-cost index funds and ETFs offer diversification while less effort from your side. In addition, such funds come with lower trading costs. But they are not for getting rich quickly. Instead, the goal here is to grow your finances passively, safely, and steadily.
Real Estate is one of the most reliable fields for investment. The main downside is that one needs a decent amount of money to start. Therefore, it might not be available for most students, yet it is a valuable option.
And you need to have a good understanding of the market and current trends. Buying a house makes sense if you plan to live there for more than five years before selling it. If you are planning to buy and rent or re-sell properties, you need to know all ins and outs of the industry to make good ROI.
If you do not have a budget, you can still focus on Real Estate but do through the ETFs.
Buying a stock means you are purchasing a piece of a company. The profit depends on how many stocks you have, the company’s value, and the time you decide to sell it.
It is riskier than previous options, but one can play safe. You can buy stocks through apps and online brokers.
The profitable industries to consider are:
- Technology (InsureTech, EdTech, or MedTech);
- Tobacco, etc.
The best approach is to diversify your portfolio. For example, do not put all the money in one company or industry but choose several. This will lower the risk of losing money at once.
A bond is a loan to a company where investors lend their finances to a specific business. Based on that, they receive interest. The profit depends on how much you can offer and the proposal. It probably won’t bring the most revenue, but it is an excellent way to diversify your portfolio even more.
Investment might not be the first thing that comes to the mind of a college student. It is a huge field with a lot of variables. But the earlier one starts, the easier it will be. Start with simple stocks, CDs, or IRAs. Investing offers the opportunity to have financial independence and stability early in life.