Finance, Investing

Trading Stocks in College: 4 Steps to get Started

Trading stocks in college

As a college student, you are a long way from your retirement and can afford to make riskier investments expecting higher returns. That means trading stocks in college (Part-ownerships in publicly-held companies) is one of the smartest investment decisions you can make as a college student. In this post, you’ll learn how to take your money from the bank to the stock market in 4 simple steps. We’re going to get you well on your way to trading stocks in college!

*Updated 11/27/2020

Why Invest?

Right now, with bank accounts returning .08% annually on average, putting your money in the bank is as good as putting it under your mattress. Historically, the stock market has had a 10% annual rate of return, making it one of the best ways to invest your money. In comparison, government bonds have returned between 5 and 6 percent annually. They are also less risky than stocks in comparison. (In theory, investors who take-on more risk are compensated with greater returns).

Now, here’s how to get started.

  1. You’ll Need Some Money for Trading

Even with historical annual returns of 10%, investing in the stock market comes at a risk. You can buy a stock today for any amount of money and tomorrow it could be worth nothing.

This means that you should be ready to lose any of the money that you invest in stocks. You probably won’t lose that money if you do research to make wise investments, but anything can happen, so you only want to invest money that you can live without.

Obviously, one way to amass some money that you can use to buy stocks is by getting a job and working. But if you want to take it outside-the-box, consider making your money with affiliate marketing, or by using Instagram. A lengthier, but possibly more-lucrative approach would be starting your own Social Media Marketing Agency (SMMA). We have info about that right here on CollegeEntrepreneur101!

  1. Choose a Stock Broker / Trading Platform

Once you have the money you want to invest, you need to choose a stock broker or trading platform (interchangeable terms). Every platform is a little bit different. Therefore, consider the differences to choose the right one for your needs.

I’ll recommend 5 platforms here, but for more options, check out The 8 Best Stock Trading Apps of 2019.

Our 5 recommendations:

Fidelity and TD Ameritrade are two massive contenders in the market of trading platforms. Being massive, they’re known for reliability, but cost a bit to trade on. I personally use Fidelity to trade stocks, and it costs $4.99 per transaction, with no recurring fees. TD Ameritrade is slightly more expensive at $6.95 per trade*. TD Ameritrade is slightly more expensive at $6.95 per trade. *2020 Update: Fidelity and TD Ameritrade now support free transactions for most trades!

Robinhood is a newer platform and lets you make trades for free. A lot of serious investors are going to default to larger brokers, but for getting started, it’s hard to compete with free.

Stockpile isn’t quite free, but at 99 cents per trade, it isn’t far-off. The cool thing about Stockpile is that it enables you to buy fractional shares of some stocks. If you don’t have the money to buy a whole share of a well-performing company, then you might still be able to invest in that company by using Stockpile.

Acorns is a little bit different. It helps you invest by rounding up all of your debit-card purchases to the next dollar, and investing the difference. With Acorns, if you bought a $1.50 soda, you would be charged $2.00. The 50 cents would be invested. Acorns professionals invest the money for you into diversified assets, including stocks. The service cost starts from $1 per month and goes only as high as $3 per month.

  1. Research your Investments.

Worried you can’t follow through with this step? Skip it and invest with Acorns. (Or see tip #4 for another smart option) However, if you want to learn how to make your own investment decisions through trial and error, this step is critical.

To learn what stocks to invest in, stay up to date on business news and stock market trends. Reading our weekly news summary would be a start, but you’re going to want to gather more information, more frequently.

I strongly recommend subscribing to the Morning Brew, a free, daily business newsletter. Right now. Do it yet?

I’ve read the Morning Brew every day for almost a year now. It has taught me a boatload about the business and investing world.

If you must have another option, subscribing to the Wall Street Journal comes with access to some of the best business news you can get, and comes with an email newsletter as well. It also costs $38.99 per month. Just so you know though, the compilers of the (free) Morning Brew read the WSJ for you.

  1. Invest

This is the last step, and it’s the easiest step to trading stocks in college. Once you complete it, you’re officially a college-student-stock-market-investor.

Once you’ve created an account on one of the many trading platforms, have money ready to invest, and have selected a company to invest in, you’re still not ready to start trading stocks in college.

Ask yourself one more time. “Would losing all of this money right now change my lifestyle?” If yes, then definitely don’t do it! If no, then you’re ready to make your first trade. Understand, the stock market isn’t a get-rich-quick scheme. Don’t try to make it one.

Make sure your stock has at least a year of price history before you buy-in. There are lots of stocks never last that long. Investing in them is the quickest way to lose your money. We’re looking at you, penny stocks.

Remember the other smart option I mentioned at the beginning of tip #3?

Here it goes: Acorns automates your investing and diversifies the money you invest for you—that’s a valuable service for sure! But if you don’t want to pay for their service, you can diversify on your own by buying funds. Index mutual funds and ETF’s (exchange-traded funds) attached to the DJIA (Dow Jones Industrial Average) and the S&P500 (Standard & Poore’s 500) are reliable options. By investing in these index funds, you will receive the market return (average return of the stocks in the index). By doing this, you’re assuming much less risk than if you were to try to pick individual stocks to invest in.

Buy your share(s). It might be one share or many, depending on the stock price. Or it might be a fraction of an expensive stock like Amazon. Feel free to check up on the performance of your investment regularly. Don’t panic if it fluctuates in value, returns are generally earned over the long-term (By holding the stock for at least one year. Often much longer). When you decide you want to invest more, diversify your portfolio by buying stocks in different companies from a variety of industries. Or buy funds that track indexes that you’re not already invested in.

Remember, when it comes to investing, time is your best friend. The earlier you start to invest, the more time you get in the market. That’s the best stock trading tip you can possibly get!

Happy investing!




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