Just because you have homework to do and classes to attend doesn’t mean you can’t start investing.
The thing is, it’s not too early to start worrying about your future – from the post-graduate job search to retirement. Yes, even if all of that seems to be ages away from now.
But investing isn’t what they show you in those movies. It’s not an overnight feat to get rich, nor is it just a matter of getting lucky or being a genius. Instead, it’s a tool to help you grow your wealth – an extremely handy one when done right.
But what does “done right” mean here? Here are five answers for you.
Dedicate (a Lot of) Time to This Project
The worst thing you can possibly do is just go in blind and gamble your money away. That’s not what investing is. So, never jump the gun!
In reality, doing it wisely always requires time and energy on your part. You need them to get educated and do your research before putting your hard-earned money to work. Consider it an investment in your future success.
But, let’s be honest, what student has the time for all of that? Well, you’ll have to make an effort to find it. So, consider outsourcing your homework to the college paper help service WritePaper or saying “no” to one more party this week. Then, you’ll have enough time for the next four steps towards smart investing.
Work on Your Savings Game
First, you’ll need some money to put to work, right? That’s where saving as a life skill (yes, that’s right – a skill) comes in.
This topic deserves its own long read, so let’s cover only the very basics of it.
- Know yourself. Track your expenses and incomes for several months to get an objective view of your current financial situation. Then, see which expenses are unnecessary and can be reduced or optimized.
- Set financial goals. It’ll be easier to stick to the plan if you know why and how much you want to set aside. Write it down and remember to think big.
- Get rid of high-interest debt. This means paying off your credit card debt first. Otherwise, the interest you owe will probably eat up all the profit you make investing.
- Start small. If you commit to saving $2.5 on your daily Starbucks coffee run, you’ll have saved $75 by the end of the month!
Know These 3 Investing Basics
Alright, you have your debt sorted out and some money ready to be put to work. Before you start looking into stocks, bonds, and index funds, read these tested and proved truths about investing in general.
- It’s never 100% risk-free. There’re always many ways things can go wrong, even with the safest of investments. E.g., the bank where you opened a savings account can go bankrupt. So, assess your risks in advance and mitigate them when possible.
- It’s never a good idea to put all of your eggs in one basket. In other, fancier words, diversify your portfolio by acquiring different types of assets (more on that later).
- Neither is it to borrow money for this. That goes not just for maxing out your credit cards. If you see the word “margin” next to “account,” stay away from it – it’s the type of account that allows you to borrow money.
Evaluate Your Options
Investing isn’t just about stocks. Here are five ways you can grow your wealth.
- Stocks. Buying them means purchasing a small share of a publicly-traded company. Your ROI will depend on whether it turns a profit or not.
- Mutual funds. They’re managed by a professional manager – they decide which stocks to buy or sell, so you don’t have to get buried under tons of research. So, when you chip in, you still acquire a share of stocks but with a lower risk of making a bad decision.
- Index funds. These are very similar to mutual funds, except that you buy a share in a portfolio of stocks of a particular market index, like the S&P 500.
- Bonds. They’re issued by a company or the government. If you buy one, you’ll be loaning your money to them for a certain amount of time and getting a reward for that.
- High-yield savings accounts or CDs (certificates of deposit). In this case, you’ll essentially be loaning your money to a bank and earning interest for it. These two are typically the least risky investments for students.
I Want to Buy Stocks/Mutual Funds/Index Funds/Bonds. Now What?
As for the how of these particular types of investing, you can use the following.
- Discount online brokers. Run by financial firms, these platforms allow their users to trade all of these assets. Some have a signup fee; some are free, but you should expect to pay commission fees on your earnings, whatever one you choose.
- Robo-advisors. These apps use AI algorithms to do most of your investment homework for you. They’ll suggest the best assets to acquire. In return, you’ll have to pay a management fee.
- Micro-investing apps. These let you get started with the tiniest amounts of money. After you connect your debit or credit card, such apps will automatically round up your every purchase and transfer the difference to your account, ready to be put to work.
Always Do Your Research
Whichever assets you’ve chosen, always do your research both on the assets and the companies you entrust with your money. That means
- assessing the broker’s/app’s/bank’s policies, especially on withdrawal and interest;
- looking for any red flags in their history;
- evaluating the companies’ potential and performance if you buy stocks or bonds – the steadier the growth, the better.
In Conclusion: Remember to Be Patient
This is a long-term commitment. That’s because, if you want to play it safe, you’ll have to opt for low-risk assets, which are also low-reward ones. And it’s easy to get discouraged with small earnings the first year: $80 in annual returns of a $1,000 investment look bleak.
But what matters is compound interest. If you put those 80 bucks to work, too, and repeat this year after year, your savings will grow exponentially over a decade. You’ll just need to be patient enough to get there and see for yourself.