Understanding College Investment Strategies And Their Benefits

College students often have many commitments, from internships to part-time jobs, and investing can be a great way to save for the future and gain experience with real-world money lessons. While it may seem daunting, investing does not require a lot of money upfront, and students can start with as little as $5 or $20-$30 a month. With the help of apps and online resources, students can navigate different types of investments, from stocks and bonds to mutual funds and real estate. By starting early, students can set themselves up for larger payouts in the future and develop valuable financial skills.

Investing in stocks

Before you start investing, it is important to understand what you are getting into. Every investor is unique, with different goals, investment horizons, and risk profiles. You should be aware of your motivation to invest and consider your schedule before coming up with an investment strategy. Ask yourself if you are investing for the short or long term, saving for a down payment, or building your nest egg.

You should also determine your risk tolerance and decide if you want to invest in individual stocks or more passive investments like ETFs. Consider how much money you can invest for the long term and which brokerage or robo-advisor is best for you. A robo-advisor is a service that invests your money for you for a small fee and is one of the most common ways for beginners to start investing.

When selecting an online broker, consider platforms that offer the tools you will need as an investor. Some platforms feature an intuitive interface and allow you to access advanced features as you gain investment experience. An investing app that allows you to trade on the go can also be beneficial. Make sure you understand all the costs involved, including account minimums, fees, and commissions.

Once your account is set up, analyze every potential investment while keeping your time horizon, investment goals, and investor profile in mind. Do your own research and make your own decisions, rather than blindly following any one expert.

Some important concepts to master before you get started include diversifying your portfolio, investing only in businesses you understand, and learning the basic metrics and concepts for evaluating stocks.

Investing in real estate

There are several ways to invest in real estate, from owning physical property to online crowdfunding platforms. If you are interested in owning physical property, you can consider buying a home as a rental opportunity. A home mortgage generally requires a 20% to 25% down payment, but in some cases, a 5% down payment may be enough to purchase a property as a rental. This option is ideal for those with DIY skills and time to manage the property.

If you don't want the burden of being a landlord or maintaining a property, you can consider investing in Real Estate Investment Trusts (REITs). REITs are companies that own commercial real estate, such as office buildings, retail spaces, apartments, and hotels. They tend to pay high dividends, making them a common retirement investment. Investors can automatically reinvest those dividends to grow their investment further. It is recommended that new investors stick to publicly traded REITs, as non-traded REITs are difficult to sell and value.

Another option is to invest through a real estate investment group (REIG). REIGs are similar to small mutual funds, where a pool of money from multiple investors is used to invest in rental properties. This option allows you to own rental real estate without the hassle of hands-on management.

Lastly, you can consider real estate crowdfunding, where you can join other investors in funding large commercial or residential deals through online platforms. This option allows you to diversify into real estate without putting up a large stake.

Remember to do your research, understand the market, and consider the level of risk you are comfortable with before investing in any of these options.

Investment psychology

Investing during college can be a challenge, but it can also be a great opportunity to lay the foundation for a secure financial future. Investor psychology plays a crucial role in the decision-making process, and understanding it can help students make informed investment choices and avoid common pitfalls.

Investor psychology refers to the mental and emotional factors that influence an investor's decisions when buying, holding, or selling investments. It involves a range of cognitive biases and emotions that can impact an investor's perceptions, attitudes, and behaviours. For example, fear of missing out (FOMO) can lead investors to focus on potential gains rather than their actual returns. Other emotional decisions, such as those driven by greed or envy, can also result in costly mistakes.

Cognitive biases are systematic errors in thinking that can affect investors' judgment and decision-making. Overconfidence bias, for instance, can lead investors to overestimate their abilities and the accuracy of their predictions. Investor psychology can also create market inefficiencies, such as anomalies, bubbles, and crashes. Market bubbles occur when asset prices become significantly overvalued, often due to investor enthusiasm and irrational exuberance. On the other hand, market crashes are sudden, severe declines in asset prices, often triggered by panic selling.

To minimize the impact of investor psychology on their decisions, students can adopt several strategies:

• Diversification: Spreading investments across various assets and sectors helps reduce risk and mitigate emotional biases.
• Long-term investment approaches: Taking a long-term perspective increases the likelihood of achieving financial goals and avoiding psychological pitfalls.
• Professional guidance: Financial advisors can provide objective advice and guidance, helping students manage their emotions and biases and make more informed decisions.
• Financial education and self-awareness: Improving financial literacy enables students to better understand market dynamics, investment products, and risk management.

By understanding investor psychology and adopting these strategies, college students can make more disciplined and informed investment decisions, improving their chances of long-term financial success.

Investment apps

Investing as a college student can be challenging, but it is a great way to create and secure your financial future. There are several investment apps available to help you get started and guide you through the process.

READYSAVE 529

The READYSAVE 529 app allows you to securely access your 529 plan account, check your account balance, transaction history, and investment allocations. You can also add money to your balance as a one-time or recurring contribution and see how your savings compare to others in your plan. The app is available for participants in various 529 programs, including CollegeInvest.

Acorns, Betterment, Fidelity, SoFi, Robinhood, and TD Ameritrade

These apps offer different features to help you invest. Some allow you to make individual trades in stocks, bonds, and mutual funds, while others have you choose your risk level and then automatically invest your money in matching mutual funds. You can research and choose the app that best suits your needs and preferences.

CollegeInvest

CollegeInvest offers a 529 Savings Plan account that can be accessed through the READYSAVE 529 app. This account allows you to save for college and provides important information about different plans.

When starting your investment journey as a college student, it is important to keep a few key tips in mind. Firstly, consider your motivation and schedule before developing an investment strategy. Be patient, disciplined, and realistic about the time and energy you can dedicate to investing. Educate yourself about the market and its ups and downs, and be cautious when discussing investment ideas with others, as people tend to emphasise their successes while downplaying their mistakes. Remember that investing carries risks, so make sure you understand those risks and make informed decisions.

Investment trends

One of the simplest ways to boost savings is through high-yield savings accounts, which offer interest rates far above traditional savings accounts while providing easy access to funds. Additionally, low-cost online brokers and investment apps can help students get started in the stock market, mutual funds, and other investment vehicles. These apps include Acorns, Betterment, Fidelity, SoFi, Robinhood, and TD Ameritrade, each with unique features catering to different risk levels and investment strategies.

For those interested in real estate, college towns offer a lucrative market for rental properties, attracting students, faculty, and staff. Purpose-built student housing with amenities like study areas and fitness centres is in high demand, and students are willing to pay a premium for convenience and proximity to campus. Co-living spaces are also gaining popularity, providing affordable options and a sense of community for students.

When it comes to investing trends, it's essential to stay informed and adapt to changing market conditions. While it can be tempting to follow a single expert's advice, it's wiser to consider multiple sources, do your research, and make informed decisions. As investing involves risk, it's crucial to understand your motivation, set clear goals, and adopt a long-term mindset.

Frequently asked questions