While attending college in itself can be seen as an investment of one’s time and effort, college students often do not learn enough about investing when it comes to their money. This inexperience is often disadvantageous as young adults are able to capitalize off the compounding interest that their investments return.
One piece of advice for college students looking to invest is to read articles, books and online resources regarding investing. Focusing on the basics of analyzing stocks and creating an investment strategy can create a solid foundation for one’s future in investing. Websites such as Yahoo Finance can also help students learn how to research and understand the performance of stocks over time.
Students should look to pay off any high-interest debt that they have before investing. The money they save from not continuing to pay interest on the debt can be viewed as a return on the investment, and this type of return is guaranteed.
While people investing their money can choose between traditional brokerages and online discount brokerages, most students are encouraged to use the latter. Traditional brokerages often charge high fees and require a large amount of startup money, while online brokerages usually charge a small fee per transaction and often have many resources available for students to learn more about their investments.
Two final pieces of advice offered to college students about investing are some of the oldest in the book: diversify your investments, and start as soon as possible. Diversification of one’s investments can allow to hedge against the inherent risks associated with investing. While some stocks may do poorly, it is unlikely that all stocks will. Someone with a diverse portfolio is less likely to lose all of their money in the market. Starting as soon as possible is one of the biggest advantages college students have, due to compounding interest. Over time, as the amount of money in a student’s portfolio grows, their interest payments will grow as well. The more time they have to allow the interest to compound, the more exponential the future payout will be.