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.
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.
Now, here’s how to get started.
You’ll Need Money to Invest
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.
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, so you’ll want to 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.
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.
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.
Research your Investments.
If you’re worried you can’t follow through with this step, skip it and invest with Acorns. 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, you’ll want to 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, and I’ve learned lots about investing and the business world because of it.
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.
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.
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 that don’t make it that long, and investing in them is the quickest way to lose your money.
Buy your share(s). It might be one share or many, depending on the stock price. Or it might be a fraction if you’re using Stockpile. 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 (After holding the stock for more than one year). After a while, if you decide you want to invest more, diversify your portfolio by buying stocks in different companies from a variety of industries.
Good luck, and happy trading.