Investment Tips for College Students

If you’re new to investing, knowing how to invest and doing it right can be an intimidating process. You need to make sure that you have enough money to follow you into retirement. As a college student, you’re interested in more than just passing tests and classes. So how can you invest wisely? Let’s take a look.

Knock Out Your Debts

This should be fairly simple. But if you’re in debt, then consider knocking out as many of your small debts as possible. Credit and store card payments should be the first thing to go, especially considering how high the interest rates are on them. Pay off total balances as soon as possible for credit card debts. But for school and medical debts? Make measured payments but it’s not always worth paying off all debts in full immediately, considering how low the interest rates often are on government loans.

Study Up

Make sure you study as much as you can about investing. Visiting both your local library and financial tip websites can provide you with the tools you need to invest effectively and intelligently. Read plenty of books and make sure you study up on tips about how to invest in stocks, what to invest in and so on. The more you know, the better. There are plenty of books out there written for college students – so pay close attention. You also may want to consider enrolling in a business class – many colleges offer classes that may offer you helpful information on investing. You may also be able to speak with a business professor, who can provide you with tips even if you’re not enrolled in his or her class. Investing may seem like a foreign language but it doesn’t have to be.

When you are searching the web for financial tip websites and investment opportunities, you will come across many, but don’t forget to visit moneycrashers.com and thestreet.com where you will get some expert advice on savings and managing your money.

Consider a Brokerage

Because you’re just starting out, consider a discount brokerage. With most discount brokerages, you’ll usually only need to pay smaller initial deposits and minimal charges on each purchase and sale you make. While a traditional brokerage is still an option, please keep in mind that many brokerages may require larger amounts of money up-front and larger fees.

Also consider whether you’d prefer an online or a more traditional brokerage system. An online system can enable you to make purchases and execute trades directly through the system while a traditional brokerage can provide you with one-on-one, more individualized assistance.

Last but not least, never borrow money to invest on stocks. This is called borrowing on margin and may increase your level of market list, which can in turn lead to substantial losses on market downturns. Definitely avoid borrowing on margin, especially if you’re a novice investor.

Be Diverse

Don’t limit your investments in a collection of small stocks. It’s too easy to be victim to stock market crashes or the stock market’s rises and falls with such a concentrated collection of stocks in one basket.As they say, don’t put your eggs in one basket. Be sure to diversify your investments in order to weather stock crashes and so on. There’s nothing worse than investing in stock that loses its value, only to have nothing to fall back on. By diversifying your investments, you can minimize risk and potentially boost your market returns. Don’t count on finding a “winning” stock. That’s gambling, not intelligent investing.

Start Early

The earlier you start investing, the more your stock may eventually compound. Interest compounds. By investing $100 a month into your investments, you may see thousands of dollars down the line later on as your interest keeps adding up. By starting early, you can ensure that you’re in better shape later on in life, versus your classmates. Many websites offer free compound interest calculators to help you get an idea for where your investments will lead you years down the road.

So the key to effective investing is simple. Start small, do your research, diversify your investments, knock out what debt you can, and start as early as possible to maximize your returns down the road. You don’t have to be a business or financial major to effectively invest and you certainly can do it while you’re still enrolled in school. Investing is something almost anyone can do if they have the patience to educate themselves. While it may mean shifting the focus from parties to investing, you can use your college years to start bettering yourself when it comes to your financial livelihood outside of college. With just a little work and patience, it’s easier than ever to invest today.