How to Invest while still in College

Most college students are rarely concerned about investments, or money matters. Their main concerns are studies, finding a good part-time job and having some fun while at it.

However, in the same college, you will find a small group of people that are interested in making money, you may find them in the library discussing which stocks to invest in, or at a quiet corner trying to come up with the next big idea.

If you are one of these people, then, you are doing the right thing in trying to secure your future as early as possible. It's hard to believe just how short four years in college are, and after that, you have to start looking for a way to make it on your own. The earlier you realize that your future is in your hands, the better.

Success stories are still being written about Mark Zuckerberg, Bill Gates and Steve Jobs, who all started their multi-billion dollar companies while still in college. They may have dropped out after it, but these were students who had a lot more to think about than having fun and books.

What we are trying to say is that being in college should open your mind up to think outside the box, learn how to manage your time, make investments and come up with ideas that can turn into the next big thing, and end up cementing your name in history.

Now, if you think that this is something you can do, here are some tips for you.

Do plenty of research:

Reading investment books and online articles on how to invest is crucial in helping you gain knowledge and the expertise you need to become a successful and savvy investor. Knowledge is power, and the more you learn, the better you are.

Try focussing on books that will give you tips and educate you about stocks, mutual funds, and bonds. These should also teach you how to develop a winning strategy for investing. Put these tips to practice in real life.

Books are inexpensive, and you can even find some free ones at the library, which have valuable information for you.

Pay off your debts first:

Before you even think about investing, look at your credit report, and analyze which facilities have high-interest rates. You need to be smart. You cannot start investing while still spending so much money on loans and credit card payments. Pay them off first, and see what you have left over.

This is how it will help you. When you pay off your debt, you get a guaranteed return on your money. E.g., if you pay off a $1,000 credit card balance, that has an interest rate of 15%, this is the same as getting a 15% return, which is $150.

Why? Because you will avoid paying that same interest in the future, and its always worth it to pay off credit cards in full.

However, if you have loans that have low-interest rates, say, 1% or even 3%? Then you may consider not settling the debt and investing the money instead.

Choose a brokerage firm to buy your first investment:

When you decide that you are now ready to move forward with your investment ideas, then, you shall need to open an account with a brokerage firm. There are two options. You can use an online discount broker, which will allow you to execute online trades using a computerized system, or, use the traditional brokers who normally offer you one-on-one customer service and advice as well.

For new investors, discount brokerages are the best. Traditional brokers will charge you a lot of money upfront and high-interest fees. A discount broker will only require you to pay a small deposit to get started.

Consider also, a brokerage firm that has free research reports and educational tools as well, so you can keep sharpening your knowledge.

Diversify your investments:

If you put all of your money in one investment it will be a recipe for disaster. An excellent example of this is the 2008 financial crisis where the Dow Jones lost more than 54% of its value in a very short time. If you had put all of your money in this investment, you would have lost everything.

You should focus on making small, fixed investments regularly, e.g., monthly or yearly. With this strategy, you can start with a little amount of money that you keep adding little by little, till you have a large portfolio.

This is what diversification means. Spreading out your investments instead of going in for one or two investments.

So, why should you start investing while still in college, yet you can wait till you graduate?

You may think that this is an activity that can, and should wait for after you graduate, but here are some reasons why you should consider making some investments while still in college.

Experience – If you start early, you shall graduate from college already having some investment experience, and this will set you up for life.

Nest egg – By keeping your money invested, it will grow your portfolio and enable you to earn some money in the process. This is what you can use as a nest egg for a rainy day. In addition, this is money that can help you get started on life after college, even before you get a well-paying job.

Maturity – It helps you grow. By becoming an investor, you are crossing the threshold into adulthood, and it means that you are not only responsible but also concerned about your future, which is commendable and admirable.

Education – Real life lessons are not learned in school. You gain an education by trying something out, taking a chance and making a move in life. This is how you learn how the world is and how to make it in life, rather than depending on your parents all the time.

Where do you start?

Establishing an investment portfolio

This is now the next step. After you have understood what investing is all about, you have put some money aside, and you are ready to start doing some serious investing, you will need first to create a portfolio.

According to financial experts, a potential college investor has a significant advantage compared to the other types of investors. This is because they have time and plenty of it. You need time to research on the best investments, and to consider the best compound interests which are interests that actually earn you money.

An experienced investor said that even a very small amount of money that is invested wisely can actually reap huge amounts of money in the near future. This, therefore, means that you should take time and build a good portfolio while you are still in college.

Here is how you start:

  • If you have a small amount of money such as $25 or even $50 you should find a broker that will accept that small amount. Do not worry about how small you start; you can always keep increasing your portfolio with time.
  • Calculate the amount of money you are willing to risk. Remember that investing is a risky venture and you must be willing to risk something in the process. Your risk tolerance is determined by the availability of funds and of course your personality if you are a risk taker or not.
  • Some investments involve very little risk such as; federal bonds, certificates of deposits, students saving accounts that are approved by the FDIC, etc. In general, these are investment opportunities that provide the lowest level of risk and also the lowest potential of making a profit.
  • If you can take in more risk, then you should consider investing in a mutual fund. This is a fund with multiple securities such as stocks, bonds, and commodities. Mutual funds normally collect and manage your money for investment purposes. Since they involve experts, the likelihood of a huge payout is very high.

Things to consider before investing:

Long-term goals

This involves evaluating the investment, in terms of how long it will take to mature. An investment is supposed to enable you to save money for a certain amount of time until you need it. Some investments take five years, ten years, 20 years, etc. However, if you are saving for your retirement, it can take a longer period before your investment matures.

Time Horizon refers to the total amount of time that an investor will hold a portfolio or security before liquidating it. It is very important to know the overall time for an investment. Short-term investments can be anywhere between one day to 3 years.

Risk profile

When you start the process of investigating the right investment for you, you must also assess the risk associated with each investment. You may find that some investments have a very high-risk factor, while others have a low-risk factor.

You need to understand the level of risk that you are willing to accept before you invest in anything.

Traditionally, investments with a high-risk factor have been known to have very high returns, while those with low-risk factors have lower returns.

Fees and expenses

Every investment will have fees and expenses attached to it. These expenses will be passed on to you by your investor. When you set aside the funds, you wish to invest, always ensure you incorporate the cost of the investment.

Investment capital

Consider what you have to invest. The amount of money will greatly influence the investment portfolio to choose. If you have 10,000 dollars, what you choose will be very different from someone with $100,000. This means that you need to stay within your budget and choose an investment that will maximize returns.

Investing in stocks and shares:

We cannot have a complete guide on investing without explaining what stock means – Stock refers to ownership or an interest you make in a company. A publicly traded company will often sell some portion of their company to outsiders in terms of shares.

This is mostly done for them to raise funds or capital. They will often announce an Initial Public Offer or IPO for members of the public to invest in their company.

This IPO is usually low priced, which is ideal for a college student. You should, however, know that investing in company shares is normally a long-term investment, that is likely to bear much fruit in the future.

When you enter this world of investing in companies, it can become extremely profitable, once you understand how everything works, such that you can be buying and selling your shares from one company to another, and build a very solid portfolio.


We hope that you are now convinced as a college student on why you should consider investing, and how you can start this worthy project in order to secure your future.

It may seem difficult and unnecessary, but it is one of those things that you will be happy you did later on in life when the payouts start streaming in. It also ensures that you are financially stable even before you leave college.

Allow yourself to be ahead of the rest in terms of finances by starting your very first investment portfolio. Take time to read and understand everything there is to know about investments and how they can benefit your life.

Don’t procrastinate and say that this is something you will do after graduating. Start now. Save and invest the little money you have, and you will be surprised by how much you may end up having by the time you graduate.

It will help you become independent and not have to go back home after your graduation, because you will already have become financially stable, such that you can even rent your own apartment as you look for a job.

The article was written by Lindy Dreyer, and then revised by her teacher Robert H. Frank.


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