How to Invest as a College Student — What to Do and NOT to Do

College is a time when you’re at the peak of your earning potential. If you’re working for minimum wage, you’re unlikely to save much money over the next decade, but if you’re a college student earning $10,000 a year, you can easily save $40,000 in a few years. (Check out our article on how to become a millionaire if you’re a millennial.) But it’s also an important time to start investing. Make sure you have your investments in place before you start college. Here are a few things you should do as a college student to start investing:

You just took out a student loan, and now you have less than 30 seconds to decide how to invest it. The following is an overview of the options you have and the information you need to make an informed decision.

Investment Basics, Determining Your Investment Goals, Defining Your Risk Tolerance, Do You Know Whether You’re Investing Wisely? All of these questions are important. If you’re not sure where to begin, you should first consult with a financial professional. They can help you determine your investment goals and match them with a suitable investment program.

Perhaps you grew up with one of the most damaging financial myths: Investing is just like playing. While there is a certain amount of risk associated with both, investing (if done right) is a long-term strategy that can bring financial freedom and help create wealth for future generations.

Smart investing is not about timing the market or picking the best stocks. Instead, it’s a matter of market timing. The earlier you start investing, the more time your money has to grow. Therefore, learning to invest as a student is the best time to start.

How to invest as a student

Most students have limited income and face competing priorities for tuition, rent, and other living expenses. As a result, they generally do not have much money to make a large initial investment or afford large ongoing contributions. Moreover, students and professionals usually have little time due to their busy study and work schedules.

All of these factors can put you off investing, not to mention the fact that you already feel like you don’t know what to do in the investment world.

So if you’re wondering: Where should you invest money as a student? We’ve compiled a list of the best investments for students, along with some investment strategies to get you started.

1. Make funding (and investments) a priority

Your financial decisions as a student lay the foundation for your future financial security. Unfortunately, this is a time when students accumulate huge debts and often live beyond their means, paying off credit cards left and right.

Make your financial well-being a priority by maintaining a realistic budget and working toward financial goals, such as B. Build an emergency fund and invest to the extent possible.

Even if it’s only $25 to $100 a month, set aside a small amount each month to invest in the stock market. This will help you become more familiar with (and less afraid of) this investment opportunity. You will begin to realize the power of compound interest and form a healthy financial habit that will serve you well in the future.

2. Use a digital financial advisor

If you are unsure of your investment skills, or simply don’t have the time to learn it now, you can outsource your investment decisions. A cost-effective way to do this is to use a robo-advisor, or digital financial advisor.

A robo-advisor will automatically create an investment portfolio for you based on a number of factors, including your investment goals and overall risk tolerance. Robo-advisors generally have a very low barrier to entry, meaning you don’t need a large amount of money to start investing.

For example, you can invest in Betterment with as little as $1. The basic digital plan has no minimum balance and an annual fee of only 0.25%, which is significantly lower than typical fees charged by other financial advisors. The company also has an investment app that allows you to easily manage your account on the go.

3. Choose your own investments using a free or low-cost broker

If you are a new investor and want to go for a do-it-yourself approach, there are many established brokers that offer commission-free online trading. Personally, I use Vanguard for my investment accounts, as does Student Loan Planner founder Travis Hornsby. But there are other reliable places to invest, such as Fidelity and Charles Schwab.

We recommend that you buy index funds to keep your investment strategy simple. Unlike investments in individual stocks, an index fund consists of a large number of stocks or bonds that track the performance of a financial market index (such as the S&P 500).

Index funds are one of the easiest ways to start investing. It is also one of the best ways to ensure a diversified investment portfolio and generate long-term returns.

4. Enrolling in the online investment course

Gone are the days when investors had to rely solely on financial advisors who charged high fees. Fortunately, the veil on investing has been lifted, and the average American can now learn how to invest smartly themselves through an online investment course.

There are many options, but Student Loan Planner’s investment course, Six-Figure Debt to Six-Figure Net Worth, is specifically designed to teach students with debt from $20,000 to $1 million how to invest.

You will learn all the intricacies and nuances of investing and be given simple investment strategies that you can apply yourself. You’ll also get lifetime access to future course updates and bonuses, such as investing in your children’s education and investing in real estate.

5. Start building up your retirement savings

Even if you’re not dreaming of retirement now, chances are your priorities will change over time. If you start saving for retirement now, you’ll be several steps closer to an early retirement and true financial freedom.

Retirement accounts receive favorable treatment in terms of how the IRS taxes (or does not tax) your contributions, withdrawals, investment earnings and dividends.

If you are currently working (for example, part-time or full-time), you can open an Individual Retirement Account (IRA) and contribute up to $6,000 per year. You will receive the tax credit in the first or second quarter, depending on whether you choose a Roth IRA or a traditional IRA.

In addition, your employer may offer a 401(k) or 457(b) plan if you work for a government organization. You should at least get as much money as possible from your employer while you’re still in school. After you graduate, you can adjust your bonuses as your salary increases.

Remember that there are strict rules about depositing and withdrawing money from your retirement savings, for example. B. a penalty for early admission.

6. Opening a securities account

A taxable brokerage account is a non-retirement account that has no restrictions on how much you can deposit or when you can withdraw your money. However, any interest or dividend income and any capital gains on the investments you sell are taxable.

This type of investment account is ideal for funds you want to access before retirement (for example, to buy a home) and for investments that exceed your retirement contribution limits.

Note that different investment brokerage accounts have different minimum balance requirements (e.g. $1,000 to $3,000) to open and buy investments. But once you reach this minimum, you can invest as much as you want.

If you are otherwise financially comfortable, try investing $100 per month in a taxable brokerage account.

Do not play: Investment opportunities to be avoided

Now that we’ve seen how to invest strategically as a student, let’s focus on what not to do.

There is a lot of financial information available, and most of it has conditions attached to it (i.e., someone ends up benefiting from it). This only adds to the confusion of how to invest as a student.

For those looking for long-term capital growth, we do not recommend investing your money :

  • Crypto Currency
  • Negotiation of individual actions
  • Options
  • All exotic.

It can be tempting to succumb to the lure of these investment options, but they are not the surest path to financial freedom. However, if you have extra income and can responsibly limit the amount you invest, it is best to consider it a nice investment. But don’t invest money you can’t lose.

Summary: This kind of investment is not necessary.

The gains that can be made from these investment opportunities are unlikely to be repeated. Short-term victory does not lead to long-term prosperity. There are much easier ways to make money investing.

Stick to a simple investment strategy

No matter how much you can afford to invest now, it’s best to have a simple investment plan that focuses on building wealth over the long term.

If you invest early, you have time to grow your money and get into the habit of investing. You can then increase your investment as your salary increases after graduation and as you progress in your career.

Frequently Asked Questions

Is it better to pay off student loans or invest?

If you can’t wait until college to start investing, there’s a way to get started now, even if you’re still paying off student loans. But there are a few things you need to know before you dive in. It’s time to pay back your student loans! But first, you should think about investing. Let’s start off by looking at what you can do with your money and what you should avoid.

How can I avoid student loans?

If you are a college student, chances are you are in debt. The good news is that there are ways to get out of student loan debt. The bad news is that you need to be careful as to how you pay off your loans. Here are some important things to watch out for: Student Loans are something that are taken out just to go to college.  Most people get loans to go to college to get a degree so they can get a good job and be able to pay off their student loans.

It doesn’t matter if you get a 4 year degree or a two year degree, you still need to pay off your student loans.  Most people don’t realize that over 60% of college graduates will have student loans and most of them will have to pay them off in their entire lives.  So, what should you do about your student loans?

What are some alternatives to student loans?

Student loans are one of the most important tools for financing your education, and they can be a lifesaver if you absolutely need them. However, student loans aren’t always the best option. You can save tens of thousands of dollars by paying your way through college, and then moving into an investment that will serve you well.

Since the rise of the student loan crisis in the 1980s, there have been many attempts to reform the system that has left so many young people, especially those who grew up in a low-income household, unable to get their degree or achieve their dreams.

 

About the Author: Prateek

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