During college, your resources might be limited, but your time and willingness to learn are unmeasurable and, therefore, valuable. But for the time being, you’re also tempted to spend money, so you need to find a solution for producing them too, but the schedule might not allow you to get a full-time job, sometimes not even a part-time one.
Luckily, technology and business have developed so much that people can now earn money passively from the comfort of their own homes. One way to do this is by investing, and starting from a young age might provide you with considerably high returns in the long run. There are many investing methods and approaches so that you can choose the style and strategy most appealing to you.
Here are five tips on investing to help you get started.
How much money do you have to invest?
Investing isn’t easy ―it requires discipline, planning and continuous studying. If you weren’t as organized with your expenses until now, it’s time to get your Excel sheets and start monitoring your consumptions and incomes to see how much you can separate into an investing account.
The first step for properly investing is to set up a budget. Check how much money you make and how much of that amount is spent on utilities, and then figure out a plan to create a savings account. It’s recommended that your emergency fund includes around six months of living expenses, so you can start taking it out of your savings accounts without worrying about your rent or food for a while in case investing goes wrong.
You need to consider how much you’re willing to lose because investing might not be one of the most constant financial activities. For example, if you invest in cryptocurrencies, the bitcoin price will never be stable, and that’s because of how this market works, but that doesn’t mean it’s not worth investing in.
What knowledge resources do you have?
Fortunately, as there’s plenty of information on the internet, official apps and websites will lend you all the knowledge needed so that you won’t have to do it alone. But you need to look for those that fit your current investing budget. For example, some apps allow you to make individual trades, while others make you choose your risk level, offering you more freedom in what you want to invest in.
However, be wary of websites or accounts that provide false information or offer free money. Investing, too, has its exposures, and you need to be careful with your money. So, never accept someone’s offer to get a few tokens or money in return for you sharing their content or participating in a contest, as it’s clearly a scam. Always get more opinions on certain digital products or pages regarding investing because there’s no right or wrong way to invest―it all depends on each person’s approach and needs.
What are your investment options?
When it comes to investing, you can choose between a few things that are approachable for a student, such as:
- A savings account. This is the easiest way to invest because you only need to open an account that allows you to store money while earning interest. The annual percentage yield can be pretty high on some accounts. And this type of account is usually insured up to $250,000, so you’re ensured your money won’t be lost;
- CDs (Certificates of deposit). Similar to savings accounts, this type of investment has a fixed time period and a higher fixed interest rate. Although you’re able to save more money, you’re not allowed to use it, or else you’ll have to pay some fees;
- Stocks. Buying stocks means earning a small piece of a company. You can choose to buy them on the Nasdaq or the New York Stock Exchange, but you can also get an app for this activity since it might be easier to track your stocks this way;
- Cryptocurrencies. Investing in cryptocurrencies can be quite risky, especially if you don’t have the patience to build your portfolio. But if you choose the safest options on the market, such as Bitcoin, which has been the most traded crypto since its release, you’ll be able to maintain a reliable source of income.
How to diversify your investments?
The key to a sustainable and dependable portfolio is to diversify your investments. That means you need to look for more sectors to invest in (technology, healthcare, retail) so that if one of them flops, you’re still supported by consistent revenue. It’s essential to understand what drives these changes in price and stability because then you’ll be able to control your assets.
Many investments are influenced by the sector behind them, so before choosing one, you need to analyze it and decide if it’s prone to certain dangers (like bankruptcy). But after you’ve made the investment, you need to constantly check the condition of the business behind it so that you can make a quick move in case of anything.
What are the risks involved?
Depending on the type of investment you choose, you can either have low-risk ones or high-risk ones. Low-risk investments are consistent and can ensure your portfolio won’t be influenced by market volatility. However, financial returns will be modest. On the other hand, high-risk investments expose your investment to greater losses but more significant returns.
It’s up to you to decide if you can withstand the risks of such investments. It all depends on how fast you want to make money and the condition of your emergency funds. You also should consider how much time you want to do this because if you’re going to invest for more extended periods and ensure you have some money when you’re older, you can take it easy. Overall, investing is a good thing for a college student to do because it teaches financial responsibility.
Regardless of the type of investment you choose to approach, remember to always make thorough research and diversify your assets. Finally, always put your safety first and have an emergency fund that can cover your expenses for a while.