If you are looking to invest while you are in college, then you are way ahead of the game! Most people do not even start investing until they are in their 30’s or 40’s so good for you! There are, however, a few things to think about before you start investing as a college student.
College Is Your Investment
Investing while you are in college sounds great, but college should be your main focus for right now. Your main goal should be to graduate college without debt. You should be working as much as you can so that you can achieve this goal.
You should be focusing on staying out of debt before you start investing. If you already have debt then focus on paying that off before you start looking at investing options like mutual funds, index funds, or even micro-investing!
Money Tree Network is meant for people who are extremely new to investing, so I will start by defining all three of the terms that I mentioned above.
- What are Mutual Funds? Mutual funds are a group of stocks that many people invest in. To help you remember, try thinking of it like this. Imagine pulling a pool of people together to buy an apartment building. The apartments are similar to the individual stocks. The building is similar to a mutual fund and the pool of people are the investors.
- What is an Index Fund? An index fund is a type of mutual fund that follows a certain market standard. The S&P 500 is the most common standard. This fund is made up of the 500 largest companies in America.
- What is Micro Investing? Micro investing is when you invest a small amount of money into a fund. Apps like Acorns, Betterment, and RobinHood all you to do micro investing through their apps. The unfortunate part about micro-investing is that you usually get micro-returns meaning you are not going to make much money off of these.
As I mentioned before, investing in college is the number one priority. You should make sure you are going to graduate without any student loans before you even consider investing in the market. This is because if you invest $50,000 into college, you are probably hoping to start making $100,000 in your career!
If you insist on investing while you are in college, I would suggest starting with micro-investing. Even though you won’t get much extra money from micro-investing, you will be able to feel like you are investing!
Acorns allows you to start investing with very little money. They give you the platform and then as soon as you put money in, they will start investing it in the market for you. You can set it up to take recurring payments out of your account, or you can put a little bit of money into your Acorns account whenever you have it.
What is a CD?
A CD is a short Certificate of Deposit. They are offered through banks and credit unions and typically have a rate of return between 1% and 2%. You have to leave your money in the account for a certain amount of time.
A maturity date is the day in which you can withdraw money from your CD without a penalty. Most CDs have a 12, 24, or 36 month maturity date. This is how long you have to wait from the day you deposit your money into the account.
Some people like to build a Ladder CD where they put a certain amount of money into a CD and then some months later they put more money into another CD. Then they continue adding money. This method allows the banker to always have money, while still getting a good rate of return.
The next best place for college students to start investing is in a high-yield CD. CDs are offered through banks and typically have a slightly higher return than regular savings accounts. If you want to open a CD, I suggest that you do not put a lot of money into it. You will not be able to get this money without a penalty until the maturity date.
Get a Robo-Advisor
Apps like Sofi, Betterment, and Wealthfront give you a robo-advisor which will allow you to invest in the market. They offer investment types such as Index funds and ETFs and will do all the hard work for you.
Robo advisors use an algorithm that allows them to read the market and know exactly where to invest your money. They are not always accurate but for somebody who is a beginner investor, this is a great way to get started investing.
I do not suggest doing this until you graduate, because graduating debt free is your number one priority. Waiting a couple of years to start investing is not going to be the difference between becoming a millionaire and not. Work hard while you are in college and graduate debt free. As soon as that is accomplished, find a full-time job and start investing away!
Get a Traditional Advisor
There are many financial advisor companies in the country that would be happy to help you start investing. I highly suggest waiting until you graduate to reach out to a financial advisor. They will charge you commision fees that you do not want to pay while you are in college.
If you use Sofi money, you have access to free financial advisors who can tell you what is best for your money. If you want to use a financial advisor, I suggest only using free ones while you are in college.
Much like Acorns, Steady is another great investing app that will also help you to start investing with very little money. You can have them round up on your purchases so that you are always investing, or you can manually do it whenever you feel you have enough money.
Steady is a great place to start investing so check it out today!
To Sum It Up…
I once again, do not suggest investing while you are in college, because it is a great way to lose money and end up in debt.
If you do insist on investing, look to apps such as Acorns, Betterment, and WealthFront to do micro-investing.
Your other option is opening a CD, which will give you a better rate of return than a traditional savings account, but will not allow you to access your money without fees. Check out all of your options and read about why I like and do not like certain ones.