College is the absolute best time to start investing for your future.
Heck, college itself is an investment in your future (just not such a
financial one). College is when I started investing. College is when a
lot of famous investors started investing. The bottom line is that investing for college students just makes sense.
Let’s dive in and look at what investing for college students really means.
Why College Is The Best Time To Start Investing
College is the best time to start investing for several reasons.
First, if you’re in college, you’re typically young. That means you
have a lot of time to invest – and time is your biggest ally when it
comes to investing. You see, the power of compounding will work
exponentially in your favor if you start investing in college.
Let’s take a simple example and show why it make so much sense.
Let’s say you start investing when you’re 20, and you just open an
account with $1,000. In 25 years (when you’re 45), that original $1,000
will have grown to $5,179 at an 8% annual return. But what if you wait
until you’re 30? If you shave off that 10 years, you’re original
$1,000 will have only grown to $2,683 at that same 8%. That’s almost
50% less. That’s why you need to start early – and why college is a
great time to start investing.
Second, college is a time to find yourself and set yourself up for
the future. On one hand, you’re doing this through your education and
developing skills that you will likely apply later in life. But the
same is true for investing. College is a time to learn – so learn how to invest!
Plus, if you do make some mistakes early on, you have a lot of time to
make it up! So, don’t be worried about investing, just jump in and
learn.
How To Go About It
College students have some options on how to go about investing. If
you’re a student that has a job (and earned income), then you can open a
Roth IRA, which probably would make the most sense for a student
worker. With a Roth IRA, you can’t touch the money until you retire,
but it does grow tax free, and when you want to use the money, you don’t
pay any more taxes.
However, if you’re a college student who doesn’t work, you have more
limited options for getting started investing. For the most part,
you’ll need to open just a standard brokerage account, but you should
use a cheap investing site like Scottrade,
which I recommend and use myself. Just because you’re not investing in
a retirement account doesn’t mean that you should open an account just
anywhere.
2 Things To Try, 1 Thing To Avoid
Finally, since you’re still young and in college, it’s important that you try things out and learn how to actually invest.
First, you should try to invest for yourself. It’s very easy, and you can find basic courses and resources
that can help you get started. Taking a couple days to really
understand what you’re doing will pay you back huge dividends in the
future (get the pun?)!
Second, you should have some fun with it by investing in at least one
individual stock for a company that you like. One of the most common investing tips
is to invest in what you know. When you stick to companies that you
know and understand, you’re typically more knowledgable about their
performance than you might think. For example, if you’re thinking about
a clothing store, by being a shopper you know how crowded the stores
typically are, how stylish their clothes are, and more. Since this is a
clothing company, these are typically factors that boost profitability,
which would boost the stock price.
However, on the flip side, you should avoid taking random advice from
other college students. One of the reasons that drove me to start this
site was that the investing club at my college were all about doing
things I didn’t agree with: penny stocks, speculation, trading, and
more. When you start to invest, make sure that you are forming your own
opinions and doing things that you’re comfortable with.
Source: http://thecollegeinvestor.com/8813/investing-college-students
