Investing for College Students

One of the most intimidating financial topics for college students is the topic of investing. From the foriegn vocabulary, to tracking stocks, to the potential risk it’s easy to simply shy away from the matter. Despite the intimidating barriers to entry, investing at a young age is a great way to put your money to work for your future. Even if you set aside a small amount every month, it can compound into significant earnings throughout your lifetime.

Steps to Take Before Investing

A great rule of thumb is to have at least a month’s worth of living expenses in your emergency fund. Using that as a foundation you can grow that 1 month fund to 3 months and even 6 months. Having an emergency fund ensures that you still have the means to live in case of an unforeseen financial strain such as losing a job, or even a pandemic.

Need tips on saving money for an emergency fund while in college? Learn about how to save money in college HERE

It’s never too early to start thinking about retirement funds. Although it may seem like an eternity away, the financial strain can creep up on you sooner than you think. By investing in your retirement in small increments early on, you can leave a big impact on your financial future. Some of the most common retirement funds types are company-sponsored accounts such as 401K’s  and individual retirement accounts such as Roth IRA’s.

Getting Started

The use of robo-advisers is a more hands-off approach to investing. Essentially you pay a fee to have your investments managed by a computer algorithm. Robo-advisers are considerably cheaper than their human counterparts, so as a college student, this may be advantageous for you.

Target-date mutual funds automatically invest into your retirement in relation to your retirement date (or your “target-date”). Because these funds target your retirement, the fund you select must have your target retirement year in its name. For instance if you are 20 years old and plan on retiring at the age of 65, your fund will likely have “INDEX 2066” in the title. The farther out your retirement is, the more aggressive the investment strategy usually is. As you get closer to retirement the investments usually become more passive.

An index fund is a mutual fund or exchange-traded fund whose holdings match or track a particular market index. Perhaps the most well-known index fund type is the Standard and Poor’s 500 index. The S&P 500 measures the stock performance of the top 500 companies listed in the US stock exchange. Index funds act as a good starting point for those who want a more hands-off and low-cost way to enter the stock market.

Overall ETFs are very similar to Index funds, however, an ETF is more flexible when it comes to trading. While an Index fund only lets you buy and sell shares once a day, ETFs let you trade anytime the market is open. Despite this flexibility, I personally believe it only encourages impulsive decision making and would recommend a Index fund instead.

Investing apps are an easy way for beginners to enter the investing world. Many allow you to start investing with as little as five dollars. The simple interfaces of investment apps make the market less intimidating and more accessible to beginners.

Start Investing From Your Phone

• No trade fees
• No account minimum
• Simple interface

• Rounds up change on everyday purchases an invests in ETFs
• $1 monthly fee
• Good for those who don’t have a lot to invest

• Subscription fee
• No account minimum
• Teaches beginners how to invest

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