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August 19, 2019

How College Students Can Start Investing

You’re in college, investing for the future is probably the last thing on your mind. That’s fair. Most college students don’t have much money and want to spend the little they have on enjoying their prime years.

But what if we told you that 1) your prime years are ahead of you–believe me, it gets much better–and 2) the little things you do now can pay off big in just a few years. Does that make you want to know more? Then keep reading.

Starting to invest when you are young, even if it’s small amounts, can really set you up for success. Not only for retirement in 50 years, that’s too far an objective for someone in their early twenties. But it will pay off when it’s time to pay college debt, buy your first home or simply live a more comfortable life. Everything you invest now will have ripple effects in 5, 10, 30 years.

So how do you get started? 

Start young, don’t stop

This is the most important part and if you’re still reading, you’re already ahead of most of your generation and probably the generation before you. The younger you start saving and investing, the better. Let’s have the numbers do the talking. 

Let’s say you start with $1,000 at 20 years old. Based on historical stock market performance, you might expect an average 7% yearly return over the long term. If you continuously reinvest the returns and keep adding just $1,000 each year, you may end up with almost $110,000 at 50 years old. Not bad for only $1,000 a year! 

And that’s only with stock market investments. If you diversify into other types of higher yield assets, you may be able to achieve even higher annual returns.

But if you were to start at 30 years old and invest $1,500 a year to make up for lost time, you would only reach about $70,000 by the time you’re 50. That’s a $40,000 difference just for starting early!

Keep the small change

Every dollar counts. There are so many budgeting and saving apps that can help you find ways to save a few dollars here and there. The best way is to have it automated so you don’t even feel it. Some banks offer services that will let you round up purchases you make with your bank’s card and send the extra cents to a savings account, like Chime or Bank of America’s Keep The Change. You don’t even see it happening and over time, your savings account can build up nicely.

Save larger cash gifts

If you get a larger amount of cash as a gift from your family for your birthday or your graduation, save it. It’s tempting to buy yourself a weekend trip, but if you can make the sacrifice, these are the best savings. Those higher dollar amounts you can invest once in a while will have the most impact in the long run. 

Educate yourself

Financial education doesn’t have to be boring. The list of easy to read, accessible personal finance bloggers is long. Check out The College Investor and Money Under 30, who both write specifically for younger people looking to get into the investment game. 

If you prefer learning through videos, YouTube has great channels for beginner investors like Ryan Scribner or Nate O’Brien. The short videos make it easier to digest and learn at your own pace.

Another easy way to keep building your finance and investing knowledge is–you guessed it–newsletters! Delivered to your inbox, generally every weekday, they offer a curated selection of important financial news and articles to help you navigate the space. My personal favorites: Morning Brew, The Balance, and The Motley Fool.

Invest Strategically

Now that you have money saved and information to get started, get ready to invest. Investing today is nothing like it was 10 or 20 years ago. You can easily access a variety of investment assets through online platforms and mobile apps. 

Strategic investing means you should be diversifying across financial institutions, assets, and types of investments.

Stocks & Bonds: If you prefer to be passive, Robo-advisor technology can help you invest in stocks and bonds without the hassle and low fees. If you caught the DIY investor bug, open your own brokerage account(s) and get ready to play. Most investors put the majority of their investments into these assets but there are still ways to diversify there. For example, you can use several apps or accounts with different institutions to take advantage of their unique benefits.

Business: If you’re entrepreneurial, starting your own business can lead to major success. Investing in yourself and your business early on is a great way to build unique skills and potential wealth. It’s not for the faint-hearted, however. You will have to commit and put in extra hard work.

Alternatives: Alternatives are now becoming available to young investors who want to diversify and access unique investments without the high entry cost. Art, collectible cars, real estate, you name it. 

If you’re curious about these options, check us out! DiversyFund is a new innovator in the online alternative investment space. Through our Growth REIT fund, investors can access a unique portfolio of real estate (mostly multifamily apartment buildings). With as little as a $500 initial investment and no platform fees, everyone can become a commercial real estate investor, no matter their age.

 

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