It no longer takes money to make money. College students can start investing with pocket change and putting their time to good use. The earlier you start investing, the more time your investments have to grow. Don’t let a lack of investing expertise keep you out of the market!
Open an Investment Account
The traditional place for a new investor to begin is with a personal banking agent. New investors can open an account online or in a local office and transfer savings from your bank account to fund it. Sometimes there are minimum balances but you generally have a few months to meet those minimums. A wide selection of investments are offered, such as stocks, bonds, and funds. Note that too much selection can be a bad thing.
If you’ve earned income from a job, consider an individual retirement account. Contributions to a traditional IRA are tax-free, so you don’t pay taxes on it until you take the money out in retirement. Roth IRAs work in reverse and can be an even better deal. You pay taxes on the money today, but then get to take it out tax-free later, which means if you sell something for a profit, you don’t have to share your earnings with Uncle Sam.
Help Your Money Stretch Further
Before you open an account or buy anything, make sure you know what it’ll cost you.
For low-cost investments, look to exchange-traded funds or mutual funds. Think of funds as ways to buy hundreds or thousands of stocks for the price of one.
Investing in low-cost index funds will allow you to capture market gains over your lifetime, and since funds are inherently diversified, you only need one or two to get started.
Add Risk Gradually
Being young and looking to invest for the long-term, there is time to ride out market dips and dives. The biggest mistake new investors make is not sticking with investing. Far too often the market dips in the first couple months of investing and people pull away.
Begin with a balanced portfolio to get acclimated to the market fluctuation. An example of a balanced portfolio can be 60% stocks and 40% bonds. The more bonds you hold, the less your account balance will fluctuate.
Consider first using a theoretical portfolio without real money to learn important investing principles.
Get Back to Real Life
Once you’ve bought your investments, take a breather and don’t look at your account for at least a few months.
Hyper vigilance can be an investor’s worst enemy. There’s no need to watch daily market movements. Check-in about once a quarter but focus on studying and leave your money to earn over time. Investing takes time and market downturns happen but over the long-term everything trends up. You simply must let it ride.