You might think that investing is something that only people who wear pinstripes and polished shoes do, but nearly every young student can start putting money to work early on. It is not a practice limited to high net-worth individuals by any means. This is a beginner’s guide for student investors who want to get started on building a nest egg.
Understand why you want to invest
Before you hand over your earned dollars to whichever investment account you’re eventually settling on, you first need to know what exactly is driving your investment journey. Are you looking at saving for a long-term goal, perhaps a major future expense, or do you want to build up wealth for the long term, such as your retirement, or generate some passive income? Your investment plan should reflect your financial goals. If you’re saving for something short-term, you might want to stay away from the more risky investments. But if you’re looking at the long-term, you’re probably in a good position to stomach the market turbulence, which could come with the added benefit of higher returns.
Start small with what you can afford to invest
The cardinal rule for novice investors is to start small. Many brokers, for example, allow you to start with just five bucks. The most important thing is to get into the habit over time. It’s not so much a question of the quantity you start with but the regularity. You could dedicate a small percentage of your allowance or any funds you might make from a part-time job. You can think of it as a regular, ongoing budget item and treat it as an inevitable expense towards the betterment of your future, like buying school books or paying for an essay writer online. Add the expenses for small investments to your budget and stick with it.
Learn the basics of stocks, bonds, and mutual funds
Learning how to invest can take a while, so go easy on yourself. It’s useful to read up on different types of investments, such as stocks, bonds, and mutual funds. Stocks could yield more returns but might be riskier, bonds are generally safer but offer lower returns, and mutual funds can be a blend of the two or actively or passively managed (like index funds). Understanding the basics will help you make better decisions about where to put your money.
Use technology to your advantage
Use technology to make investing easier. One of the best ways a beginner can invest is to find an app or platform to help them simplify the process. It’s like using an essay writing service for your school projects. There are plenty of options out there to help you get started. Many of these apps have educational tools that can help you learn about different investing concepts. They can also help you set things up and automate the process, such as by setting up regular contributions to your investment fund so that you don’t have to do it manually.
The following are a few of the most popular investing-oriented apps, each with particular features to accommodate different kinds of investors:
- Robinhood. Easy to use and commission-free, this trading app for stocks, ETFs, and options is a good choice for first-time traders.
- Acorns. This app allows you to invest in spare change with an automated “round-up” feature that invests the change from your everyday purchases.
- Betterment. This robo-advisor is an automated algorithmic financial planning service with little to no human supervision. It’s great for hands-off investors.
- Wealthfron. This automated investment management and financial planning service, similar to Betterment, is aimed at passive investors.
- E*TRADE. Both an online trading platform and an app, E*TRADE is designed for more active traders who may wish to use the app to research trades and monitor positions while logging in online for trade execution.
- TD Ameritrade. TD Ameritrade is the best choice for traders who want excellent educational content and reliable trading tools. They’re also great for beginners looking for a platform with excellent educational content.
- Fidelity. With no account minimums and a complete, full-service investment platform, Fidelity is a great choice for new and experienced investors. It offers zero-expense-ratio index funds.
- Charles Schwab. Schwab offers full-service brokerage, banking, and financial advisor services, as well as some of the business’s best customer service and platforms.
- Stash. With this tool, you can start investing with as little as $5 and get educational materials on your investments.
- M1 Finance. A blend of robo-advising and classic brokerage services, you can choose pre-built portfolios or create your own (with automated rebalancing).
Keep your costs low
As a student, you’re probably already trying to keep your costs low. That should be just as important when it comes to investing. Look for investments that have low fees. High fees normally reduce your returns over time, but it’s especially painful when starting with small amounts. Index funds, for example, are famous for their low fees and are a favorite among many long-term investors. Another option is to use a robo-advisor, which tends to charge lower fees than a human financial advisor.
Stay patient and keep learning
Investing is more like a cross-country race than a sprint – it helps to be patient and keep your head. Markets will move up and down, so it’s important not to lose heart. Life is full of surprises, and the best way to stay on top of the curve is to continue learning and adapt as you go. The more you educate yourself, the more you’ll be able to absorb the uncertainties of investing.
From pennies to profit
Despite a common belief, as a student, you’re in a prime starting position for investment. Saving and investing small amounts today creates good financial habits that can carry on throughout life. Over time, your investments can become a large and valuable nest egg that will take you closer to your goals. Embrace the learning curve. Start small. Be consistent. Before you know it, your investments will grow. Your future self will thank you for taking the first step today!
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any finance decisions. Appropriate independent advice should be obtained before making any such decision. London Loves Business bears no responsibility for any gains or losses.
