How To Invest In The Stock Market as a College Student?

Many big-time investors start out young. Building up your habits and knowledge to suit the economic environment is an essential building block for a savvy investor. Getting into the stock market when you’re still in college can give you a great head start on the networking and strategy that will pay off for you once you reach your maturity as an investor.

Investing during college will also allow you to get a lot of the trial and error out of the way. You’ll get your bumps and bruises early on and learn from your mistakes to solidify the habits and ideas that will make you a good investor.

The stock market itself can be a cruel mistress, and college life isn’t without its challenges. To get you started, I’ll discuss why investing in college is important, as well as how you should go about doing it, and a few practical tips to get you on the right track.

So, the first question we need to ask ourselves is: why?

Why am I Investing in the Stock Market?

Whether you’re looking to start a good nest egg, or just trying to get a handle on how to invest for future prospects, college can be the perfect place to start getting your hands dirty. That being said, obviously college comes with its own challenges, many of which can be money related.

For this reason, it’s important to form an idea of why you’re choosing to invest. What is your strategy? Do you know anybody who can help you out? Are there resources or groups around campus that focus on this sort of thing?

Figuring out your exact expectations and surroundings will allow you to formulate an effective strategy. College requires a lot of time and effort to achieve good performance, and so does a good investment strategy.

If you decide to pursue investing in your spare time while attending college, the key to your success will lie in your preparedness and knowledge. Good financial strategy comes from careful planning and an idea of one’s own psychology. If you’re not the type of person who will remain motivated and steadfast when faced with challenges, then you will have a hard time maintaining a good investment strategy while trying to get good grades.

That being said, if you are that type of person, college has the remarkable quality of bringing together many minds eager to learn. There will often be clubs or organizations centered around how to invest your money and learn about financial strategy.

This is especially useful if you’re attending classes related to business or even investment directly. You will often be able to find great resources through your professors or classmates.

So, to review, let’s go over a few of the pros and cons of investing while in college:

  • PROs
    • Get an early start
    • Learn from early mistakes
    • Good networking opportunities
    • Excellent learning resources
    • Build a useful skill with tangible results!
  • CONs
    • Requires a lot of time and effort
    • Requires meticulous planning and steady motivation
    • Can present extra costs
    • Can divert attention required for academic performance

All in all, you shouldn’t be surprised by anything on this list. Like I said before, if you are the type of person who can motivate themselves to manage both learning and finances with patience and dedication, you’ll find this a no-brainer!

Now that we’ve taken a look at why we’re choosing to invest our money, and formulated the backbone for our financial strategy, let’s take a look at the strategy itself.

How Should I go About Investing my Money?

As a college student, you probably have a whole host of costs associated with your learning experience. This means that you’re probably limited in terms of startup capital and so forth, but this doesn’t mean you can’t get some of the basics of financial strategy out of the way.

If you haven’t already, take a look at the basics. Read about long-term vs. short-term investments and the types of stocks in which you’ll want to invest. Read up on some companies you’re interested in, and do some research on how their stocks have been performing.

When you have some ideas of what you want to do with your money, you can start looking at opening an investment account. This has become a lot easier in recent years, with new developers releasing apps and web services that allow you to invest your money easily.

It used to be necessary to meet with a financial planner and talk at length about your financial strategy for an expensive fee, but there are a myriad of new ways nowadays that make investing easier than ever.

These services are great if you’re just looking to get started investing as a student:

  • TD Ameritrade. You may have come across some information on Exchange Traded Funds, or ETFs. These function kind of like mutual funds, except they are traded on a stock exchange. TD Ameritrade is a discount broker which offers commission free ETFs from many players in the industry. They have no account minimum and no maintenance fees.
  • M1 Finance allows anybody to get started investing for free. It offers the ability to create a diverse portfolio and maintain it easily at no cost. They have pre-set portfolios as well.
  • While Fidelity is not 100% free, it offers commission-free ETFs. The Fidelity Individual Retirement Accounts also have no minimum required to open, and no account fees.
  • A reliable, low-cost investment service. They are a consistent advocate for lower fees for investors. You won’t pay any commissions buying and selling Vanguard ETFs, and there’s no account minimum.
  • To put it simply, Robinhood is an app that allows users to buy and sell stocks for free. The app offers a range of capabilities, like buying or selling stocks at market price, or the ability to make limit and stop loss orders. Includes basic research tools.

There are many more services and tools out there for those investors willing to learn. It will definitely pay off in the long run to do your own research on the topic. Finding an app or a service which fits your schedule and financial expectations will make it a lot easier to stay motivated and start seeing successful returns on your investments.

It’s a good idea not ruling out the possibility of consulting a financial planner, as well. While it can be costly to pay a bunch of fees every time you want to talk about your portfolio, speaking with a professional is a good way to get informed, and it might be an affordable option for some investors, even just starting out. Remember that this was the way it was done for a very long time.

That being said, one of the most overlooked aspects of starting to invest while you’re in college is campus culture. You’re surrounded by students (some of whom might even be taking business or financial planning courses!) and clubs who offer special-interest activities for students looking to invest! Taking full advantage of the networking possibilities afforded to most students is going to be key to getting your foothold in the world of stock market investment.

So we’ve looked a little bit at financial strategy, we can take a look at some of the major pitfalls that can challenge your investments, and some of the special challenges that college life may present for you going forward.

What Kinds of Challenges can I Expect?

As a college student, you’re probably aware of the major challenges that college can present for time management and motivation. It’s hard to keep all of your obligations straight, especially while trying to become educated in building an investment portfolio!

There are financial concerns as well, which are probably the foremost problems facing most college students trying to invest.

There are other challenges, however. A major factor that many people overlook is the psychology of stock investment. It can be very nerve wracking trying to find the right moment to buy or sell, and if you’re emotional or impulsive, you can easily make bad mistakes which eat into your limited funds.

So, what kinds of challenges are we talking about?

  • Time management issues. Obviously, as a student, you will be very busy with your classes, as well as a job, most likely, to support your expenses. This leaves you without a lot of time to manage your life, or your investments. To reap the benefits of getting started investing in college, you will have to get used to successful time management. Learn how to cultivate these habits early, so that they don’t end up hurting you in the long run.
  • Budgeting challenges. Just like with time management, it can be easy for some college students to forget that they should be working with a budget. Having your personal finances in order will ensure that your investments aren’t jeopardized by surprise expenses or things like bad credit. Look up some tools you can use to help yourself budget effectively, while saving some capital for your investments.
  • Basic financial literacy. Obviously, this one should be a no-brainer, but you would be surprised how many people college students especially, who go into stock investment without an adequate background in basic financial management. Learn the different terminology, and the things you should be aware and on top of.
  • Costs of being a student. When you factor in tuition, resources, residence, transportation, and the myriad of other costs college students incur, it can be impossible to find room for starting your investment. Even building a budget in the wake of all these costs can be a daunting task. Getting a very well-rounded idea of all the expenses you can expect will give you a definitive advantage.
  • Things you take for granted. Don’t forget that there are some basic costs that many people overlook. How can you invest using an app if you have no internet connection? Where are you keeping your money and are you paying unnecessary fees? How much are you spending on food? Can you save some money in any of these areas? Being vigilant will make it easier to avoid the dangers that college life can pose to an investment portfolio.
  • Predatory scams. You’re just starting out, and you’re not alone. There are so many young people just getting started in the world of stock market investment, that it can be easy for less scrupulous individuals to scam well-meaning students out of their hard earned cash! Even with legitimate professionals, it can be easy for them to take advantage of you. Making sure you have a firm foundation of financial literacy will help to curb this possibility.
  • Your health! It’s easy for any college student to fall into the trap of eating out and becoming sleep deprived. These bad habits will cause you to lose patience and motivation when ti comes to managing your investments. It takes a lot of research to stay informed, so take good care of yourself!
  • Investment psychology. This is probably the most important thing people tend to overlook. Investment, like anything dealing with economics, is just as psychological as it is mathematical. Understanding the psychology between people’s decision to buy or sell a certain stock will play a huge part in your decision making for your investments.

Getting a handle on all of these factors will help you with managing the things most people forget about. Not all of them deal directly with investment, but they are good rules of thumb to keep in mind as you go forward.

After that, you’ve got a pretty good start on knowing where you need to go. There are lots of options and avenues you can go through from here on, so let’s take a look at some ways you can expand going forward.

Where do I go From Here?

Once you get all your budgets figured out and you’ve spent some time getting to know the industry and the tools at your disposal, you’re ready to actually invest your money. Some of the services I mentioned earlier offer research tools or even pre-set portfolios for you to play with, and its a good idea to just dive in sooner rather than later, as long as you’ve done your homework!

So now you’ve got a nice little portfolio. If you played your cards right, you should be seeing some returns even on a small amount of startup capital! Choosing the right service to handle your investments is key here.

Expanding your portfolio shouldn’t be too hard once you’ve wrapped your head around the basics. If you started small, you’ll get an idea of how these things work and how to identify risk. Once you know where you stand, you can start buying more and being a little riskier with your investments, if you so choose.

Don’t get carried away! And remember to diversify! If you have all of your money invested into a single company, then you will lose everything if they experience an unexpected failure! These kinds of horror stories won’t happen if you invest in various companies or industries.

Even when you’re expanding and trying to grow your investment ability, taking baby steps is essential. Remember your investment psychology, and remember to do your research.

Aside from those factors, there are a few key points that should be made about going forward once you’ve established your investment:

  • Invest in better help. Even if you started small and experienced success with a free app like Robinhood, you might want to invest in a higher-end financial planning service to manage your investments. Once you know what you’re doing and you’ve learned all you can from small-time resources, there’s no reason you can’t scale up your toolset as well as your investments.
  • Don’t be overactive. Trying to meticulously capitalize on every single dip and bump in the market can eat up your time and energy. Worse yet, it can distract you and make you forget your investment psychology. Impulsive decisions can make all that invested effort feel like it was for nothing, so it’s good to keep your wits about you and learn to let your money grow.
  • Research stocks that lose less in a downturn. If you’re overly concerned with losing money, you can check to see how certain stocks have performed during loss periods. If the company has a tendency to bounce back, or lose less even in situations where other companies falter, it can be a safe bet for expanding your portfolio without incurring too much extra risk.

The main rule of any investment situation is to keep your wits about you and do your own research.

Further Reading

There are a few concepts which I mentioned in passing, which deserve their own explanation. Others I’ve included here are things that you would benefit from learning about. Remember that managing an investment portfolio, especially just starting out, is about learning and psychology.

  • Business terminology. There are a lot of complex terms used in investment, and business in general. Looking through a glossary of terms or investing in some business education might be a good idea if you don’t want to get overwhelmed by words you don’t understand.
  • Different types of investment. Mutual funds, margin trading, put options, the world of investment is vast and complex. You’ll be dealing with basic types of stock investment when you’re just starting out, but understanding the different types of investment and how they work will be an invaluable tool going forward with your investments.
  • Networking tools. Being able to trade information and opportunities with other investors is a powerful tool, and one of the main advantages to getting started in college! Make sure to capitalize on this opportunity and get involved with clubs and such around campus. Seeking out clubs and resources like this over the internet and social media can be a boon, as well. There are many different ways in which investors collect to help educate and profit from one another, so keep your mind open.
  • Courses and education. If you aren’t already getting a business education as part of your college career, investing in cheap online courses or night classes can be a good way to educate yourself without getting lost. Not everybody can sit down with a set of links and textbooks and teach themselves economics! Making sure to get the most out of your course if you are taking business in college, is a good idea, too. Ask lots of questions and see if your professors or fellow students can’t hook you up with some good info or opportunities!

There are many more technical aspects that fit under these general umbrellas, but all in all, you will mostly benefit from researching these things yourself. Reading articles about investment is a good way to find condensed information, but remember that the stock market can be extremely volatile and difficult to understand.

I Think I’m Ready for This!

You’re probably eager to start downloading some investment apps and doing your own research. hopefully after reading this you have a clear idea in your head of what you’re going to do. If you always remember to do your own research, you’ll probably be fine.

One thing I do want to stress extra hard before I go is the point I made about investment psychology. Understanding why humans (including yourself!) make decisions in any context is the single most important part of understanding how to make decisions with your investments.

Pay attention, stay informed, and stay smart. If you take all the necessary precautions, you should be able to minimize your risks and make every stumble a learning experience. Keeping a patient mindset and a versatile understanding will help you endure your growing pains and really start making a good difference for You!

You’ll thank yourself for starting early.

Happy investing!

Updated on: October 30, 2018