How to Begin Investing While in College

And start building your net worth early

How to Begin Investing While in College

Going to college, moving away, and starting a new independent life is a transforming experience for all prospective college students. Students will have many things to get a handle on. From juggling between attending their classes on time, making new friends, and submitting projects and assignments before their deadline. It doesn’t always seem like they would have time to do anything else. However, college years can be a huge opportunity for those wishing to enter the world of money management and investing and get a head start on their financial futures. Regardless of the amount of money you have to invest, you can teach yourself about the various financial instruments and markets and learn about stocks and mutual funds. This may in turn encourage you to save more and even get a job in college if time allows to start building up your net worth early.

So, here’s a brief guide on how you can start learning about investing during your college years.

Start a High-Yielding Savings Account or Certificate of Deposit
While opening a high-yielding savings account may sound like the only logical way to start investing, certificates of deposit, or CDs are also paths to earn a higher interest rate if you have some money in a savings or checking account you won’t use soon. CDs are one of the safest investment options you’ll find. CDs work by giving you a fixed interest rate on an amount of money you commit to the bank for a pre-specified timeframe. They’re great for investing some of the money that you may not need until a specific future event. You get to park your money in a safe account that can’t be impacted by the stock market. The only downside is rules restricting taking the money out earlier generally mean you will forgo any interest if you have to withdraw funds before the CD matures. As such, high-yielding savings accounts are a great option too. They provide the same security and a similar rate of return in addition to letting you make withdrawals at any given time. The interest rates you can gain in high-yield savings and CDs vary at different times so make sure to understand the rates you are receiving compared to other options.

Invest a Little Money Every Month
Starting your investment journey with even just a small amount of money can be really a great way to start and build your portfolio. One of the best ways to start is using a commission-free broker so that you can minimize the fees that can eat into your return for your money. Lower fees mean more money can accumulate into your savings or securities accounts. You can even start by investing in $1 dollar stocks or putting in an amount of $20 or $30 every month and watch as your balances slowly grow each month. Some brokers even offer investors to buy fractions of certain shares. Index funds are usually easy to invest in with small monthly increments and offer the advantage of diversification (more on that later). The most important thing is to start as early as possible no matter what the economic conditions are in order to build a portfolio.

Build Solid Investment Knowledge
Being a college student may mean you don’t get enough resources to actually invest much of your money. This is why, it’s just as important to invest in your own knowledge of finance for after you graduate. The investment industry can be confusing and you need time to familiarize yourself with the different aspects of financial investments. You can target a few of these that are of more interest to you to research and learn about them first. Your major in college may even be applicable to helping you understand and educate yourself in this area. You might want to watch the market for a period of time to understand it better before you begin investing in it.

Buy an Index Fund
Buying an index fund is one of the simplest ways to start investing. The majority of popular index funds are based on the S&P 500 index or the Standard & Poor’s 500 indexes of large US companies. This type of fund holds hundreds of all the stock shares in the index which means that it provides less-volatile returns and is more diversified than individual stocks. It feels like you’re buying the entire market whenever you buy an S&P 500 index fund. Fees are index funds are generally much lower and are a safer investment if you feel you are less experienced and knowledgeable.

Find an Investing App
Did you know that some apps out there can help you invest a little bit of money each month with minimum fees for the whole process? These apps are called investing apps and there are a few popular ones you can find online. They only charge a small amount to get you started, and they help round your monthly credit card purchases to the next dollar so that the difference can be invested automatically in any ETF portfolio. You’ll notice that most of these apps charge nothing more than a dollar every month, while some may charge extra for all-in-one services. If you can subscribe to one of these apps, you’ll be able to invest monthly without the hassle of deciding on the amount or choosing an ETF or remember to make transfers. Small monthly or weekly deposits can really add up over time.

Many college students find it difficult to focus on anything else other than their academic curriculum and making new friends. With independence, students must find a way to balance school, their social life and sometimes work. However, it is great if students begin to learn about managing money and investing while in college. Starting early means one learns the ins and outs of all the different types of financial investments and helps one to build a strong portfolio when landing a job after college.


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