Why You Should Invest While You’re Young: Just the term “investing” can seem like a concept intended for older people—those individuals who are already settled in their careers with families and disposable income they can put in a variety of investment opportunities.
In reality, investing can be a smart move for anyone, and in particular college students. It can be hard for young people and especially college students to jumpstart investing since they usually aren’t in a career yet and may not have a lot of money to set aside. However, if they do make the leap into investing, they can retire earlier and with more money than their peers who don’t start until their 30s, 40s or even 50s.
With that being said, investing as a college student can require a different approach as compared to older investors.
The following are five tips for students who want to invest money, but aren’t sure where to begin:
Invest An Amount of Money You Can Lose
Of course, no one wants to lose money investing, but it is a real possibility. If you’re young and just starting with investments, only put in an amount of money that you can reasonably risk losing. For example, if you’re putting your entire savings into an investment and losing it would mean a cut to your lifestyle, it’s probably too much.
Consider Penny Stocks
Many younger investors and people who have found success through investments got started in penny stocks. Penny stocks aren’t without risks, but they are low-priced shares that can be more realistic for young investors. Most penny stocks are less than $5 a share, and if you’re willing to put the work into researching the best methodology to be successful in this approach, you may find this is an excellent option as a student investor.
Determine Your Goals
It’s crucial for any investor, but particularly young ones, to consider why they’re doing it before making any big decisions. If you want to strike it rich quickly, your approach is going to be unique from someone who’s doing it as a long-term wealth-building strategy. Your motivations will drive how you invest your money and also how you manage it once it is invested.
Psychologically Prepare Yourself
Much of the investment game revolves around psychology. There is a tendency to want to buy high and sell low among investors of all ages. Educate yourself from the start on the psychology of investment and how you can avoid falling prey to the whims that can come when you see volatility in the market. The more prepared you are to weather the storms, the better long-term outcome you’re likely to see.
Do Your Research
The best thing you can do for yourself as an investor of any age is to research. Don’t just jump into something and hope for the best. Do the legwork required to understand the in’s and out’s of varying opportunities and actually work to find one that’s best suited to your goals, your needs and will fit well with the amount of money you’re going to be able to invest.
The Earlier, The Better
One of the biggest reasons it’s advantageous to start investing as early as possible is because of compounding, which means you can grow your investments through reinvestment of what you’ve earned. When you set yourself up to take advantage of compounding you’re more likely to not just create a retirement nest egg but be able to build true wealth over your lifetime.