7 Best Ways to Invest While in College

7 best ways to invest while you’re in college

Moving away from home, making new friends, and getting to class on time are just some of the big changes that college students face after high school. With all this new group of adults are facing, it’s a wonder that there is time for anything else, let alone investing.

But surprisingly, college is actually one of the best opportunities to get started in the world of investing. Even those with only a little cash can start building a portfolio, and this can be an advantage because you’ll learn how to invest — and deal with some inevitable losses — without large sums. risk of losing.

Investing As A College Student: How To Get Started

Sure, college can be one of the most difficult times, carrying extra change just to do the things you need to do, let alone the things you want to do. But it doesn’t take a lot of money to get into the investing game. With all the free or low-cost options available today, a modest $20 or $30 can get you in the game. More importantly, it gets you thinking about investing.

In fact, the hardest part of getting started investing is starting to think of yourself as an investor – whether as an actual owner of publicly traded companies or even as an investor in various cryptocurrencies. as holder.

You want to take an owner’s long-term mindset toward your holdings, analyze what’s happening in the market over time and take moves that have a good chance of paying off, eg. Learning these lessons early – when they are not costly – is valuable.

While we typically think of investments as reserved for the wealthy, it’s not quite like that. Students should consider how they can use investing to build and secure their financial future even before pursuing a career.

Here are seven ways for college students to get started investing, from the super-safe to the bold.

1. Consider starting with a high-yield savings account or CD

One of the simplest ways to boost your savings is to open a high-yield savings account. These accounts pay interest on your deposits at rates far higher than those available through traditional savings or checking accounts, while still giving you the ability to make withdrawals at any time. And interest rates on these types of accounts are going up in 2022.

Savers often don’t think of bank products (such as high-yield savings accounts, or certificates of deposit, or CDs) as investments, but they are. And they are some of the safest options around. The CD will pay you a fixed interest rate in exchange for lending you money to the bank for a fixed amount of time. These investments can be a good place to store money that you do not need until a specific time in the future.

For example, if you have money for next year’s tuition, you probably want it in a super-secure account that won’t fluctuate with the stock market. A CD fits the bill for this type of need.

2. Turn to a free or low cost broker

If you want to jump into investing, it can’t be very cheap. There are several impressive low-cost online brokers – such as Fidelity Investments and Charles Schwab – that offer free stock and ETF trades while providing great research and educational tools to start you on your way. For example, Fidelity and Schwab both received top marks in these areas and are noted for their overall customer service and investor-friendliness.

But if you want to go all free – great for college students looking to cut costs – then you can turn to Robinhood. The main selling point of Robinhood is that it is free to trade on the platform, including options and crypto. Robinhood Gold also offers research to Morningstar for a relatively cheap $5 per month. With a slick trade-anywhere mobile app, Robinhood makes an excellent option for those looking to cut costs to a minimum.

Webble is another option, especially for the cost-conscious investor. Like Robinhood, Webble also features commission-free trading, but it has more customer support options and offers retirement accounts that Robinhood does not.

3. Invest a little every month

If you go with a commission-free broker, you are going to be able to invest modest amounts every month and your capital is not eaten up by fees. So, more money actually goes into your stocks or funds. You can even just withdraw $20 or $30 a month and start seeing money in the stock market. Many brokers now offer investors the ability to buy fractions of stock as well.

Starting over is important regardless of what the economy is doing. Even with a modest amount invested, you will be more motivated to follow the market. More importantly, you can start thinking of yourself as an investor. Investing money also encourages you to do research and analyze your holdings. So starting even just a little bit can be really beneficial.

4. Buy an S&P 500 Index Fund

One of the easiest ways for an investor to get started is to buy an index fund, and many of the most popular index funds are based on the Standard & Poor’s 500 Index of large U.S. companies. An index fund holds shares of all the stocks in the index, hundreds in the case of the S&P 500. By holding so many stocks in a wide variety of industries, the fund is highly diversified and typically provides less-volatile returns than owning individual stocks. ,

Another advantage of index funds is that you don’t need to know a lot to get started. Buying an S&P 500 index fund is like buying the market, and you will get market returns. It’s a great way to learn how investing works, and it’s the strategy recommended by legendary investor and billionaire Warren Buffett for most investors.

5. Sign up for a robo-advisor

If you’re not ready to commit to individual stock or index funds, you can opt for a robo-advisor. A robo-advisor automatically builds a portfolio for you, selecting funds based on your time horizon and how aggressive you want to be with your investments. Beginner investors can start with very little money – even $20 can get you going – and you can grow in wealth without any additional transaction costs.

For their services, robo-advisors typically charge a percentage of your assets, often 0.25 percent annually, although some waive the fee for smaller accounts. Wealthfront and Betterment are two of the big robo-advisors that hit this price point.

Typically, you will not pay any additional fees to the advisor, although any funds you invest in usually have fees based on your ownership. You’ll often also get other benefits from an advisor, including attractive interest rates on cash accounts and you usually won’t have to lock up your money.

6. Turn to an Investment App

One way to make the investing process even simpler is with an investing app. A popular mobile app that can help here is called Stash, and it allows you to buy a few individual stocks or a selection of ETFs. It only takes $5 to get started, and a basic account costs $1 per month. If you don’t know how to start investing but want to learn and do it yourself, Stash will help you out.

Another popular investing app is Acorns, and it made Bankrate’s list of top investing apps because of how easy it is to use. With Acorns, you link a debit or credit card, and then the app rounds up purchases to the next dollar and invests that difference in some ETF portfolio. Acorn offers a basic all-in-one subscription for $3 per month and a family edition at $5 per month.

7. Open an IRA

When you’re in college, it may seem like you’re jumping the gun at the thought of an IRA. But an IRA can actually be a great opportunity to build your future savings if you’re earning money with a job, like many students are.

 An IRA allows you to defer taxes on any gains or dividends, and deduct your contributions from your taxable income, saving you money on taxes. Plus, the sooner you start investing in a tax-advantaged account, the longer you can harness the power of compounding to max out your account.

A Roth IRA can be another great way to start investing for retirement. Contributions to a Roth IRA are made with after-tax dollars, so there won’t be any tax savings right away, but your withdrawals will be tax-free during retirement. 

By making contributions while you’re in college (and paying a lower income tax rate), you’ll avoid a bigger tax bill down the road when more of your income is likely to be taxed. Like a traditional IRA, your investments in a Roth IRA will be allowed to grow tax-free.

Those advantages can be an easy win for little effort.

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The most important point for college students looking to invest is also the most important – start today. The sooner you start learning about the market, the sooner you can start planning your financial future. Students can start with a modest amount of money and expect both their knowledge and their portfolio to grow.

Keep in mind that a measured approach makes sense when you’re just starting out. Going “all-in” on a stock or a particular asset class is particularly risky and could result in significant losses in the event of a downturn. Volatility comes with most investments and learning how to deal with emotion is an important part of the learning process.

7 Best Ways to Invest While in College

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