Investing In Your Future

Paychecks can be an exciting thing to receive as a potentially broke and busy college student. While a $250 paycheck could buy things you have been eyeing the past two weeks, the smart thing to do is only pocket 80% of it. You may think that throwing the other 20% into a savings account is best, but investing is where you can make your money work for you.

Investing is a scary word. It can seem impossible or risky to get into the world of investing. Starting out is not going to involve a massive amount of cash or complicated trading — it can be something simple for a hustling college student.

WHAT EXACTLY IS INVESTING?

Associate Finance Professor in the Smeal College of Business Dr. Simin explains that you are essentially an owner of the company. When you buy shares, you are investing your money into a business so that they can use it to grow. Some companies even give out dividends, which are small payments given by companies that you own stock in. Essentially, it is a piece of their profit.

HOW DO I GET STARTED?

It can be challenging to figure out where to buy from and what to buy on to start investing. Dr. Simin suggested Robinhood, an investing app that makes it easy to buy and share stocks and ETFs. ETFs are exchange-traded funds and are a collection of stocks that buy and sell throughout the day. There is no investment cost, and all you have to do is put in as much money as you feel comfortable with.

Guy Whitehead, a partner at Craig Hallum Capital, a trading, research and investment banking firm, recommends that you invest on a regular basis and invest consistently. As someone who has been investing and trading for 22 years, he says, “A young persons’ biggest asset is the time they have for the portfolio to grow.” The idea is to invest consistently and small in companies that you believe the world can’t live without.

When it comes to platforms, you can use an app like Robinhood or trading platforms like Schwab or Fidelity to open an account. With a trading platform, you can pay a small fee for them to trade.

HOW DO I KNOW WHAT TO INVEST IN?

Dr. Simin recommends investing in companies that you personally believe in and trust in. Obviously, there are companies that do pretty well overall, but if you have an interest in a certain market, buy shares in that market with companies that you see growth in. It is all about doing your research on companies and investing in those who you think will do well. Whitehead used the example of Tesla. People who invested into the electric car business thought that they could see a future in that field. So, once Tesla took off, their stocks did very well.

Investing in companies you believe strongly in is key, but also remember that you should not put all your eggs in one basket. Creating a strong and diverse investment portfolio is best to limit the risk of placing all your money into one company.

WHEN DO I BUY AND WHEN SHOULD I SELL?

The old saying goes, “buy low, and sell high.” This is an important thing to keep in mind when it comes to buying and selling stocks. Buying low and selling high is called selling at a “capital gain,” doing the opposite would be referred to as a “capital loss.”

Dr. Simin gave an example of a time he invested in a TEVO stock, thinking they were going to do well. The stock ended up tanking, and he saw that he needed to get out, so he sold the share for a capital loss. The thing you should know about capital gains is that you will be paying taxes on your earnings, with losses, you do not have to file them on taxes.

When selling, Whitehead recommends that you do not sell stocks unless the “story changes completely,” meaning that the stock is not looking to do well in the future. He says that stocks work the best between your ages of 20 to 50, so try not to sell them too quickly.

WHY SHOULD I INVEST? IS IT WORTH IT?

By purchasing shares in companies, you are doing two simple things: investing into a company to allow them to grow, and in return, that will allow your money to grow. Saving money is important for emergencies in life that might require some petty cash, but investing allows for your hard-earned money to work for you. By small contributions and patience, you can find real growth through investing. Time is on your side as a college student, and the more time you let your money grow, the more you will see later on.

Another benefit to investing is that you can put money in now to take out when you retire. Saving a portion of your paycheck and putting it into a separate savings account for your retirement is a good idea since the risk is low. Since it’s low risk, you will have that money available when you retire.

Retirement was once secured for you through Social Security, but that seems to no longer be the case. According to CNBC, the trust fund for Social Security is projected to run out by 2034. This depletion means that Social Security will have paid out 75% of their benefits. Although the program can face reforms and fixes — for your financial safety — it’s best to not rely solely on it.

As a beginner, investing seems scary. But with small and continuous contributions, investing can help grow your money without much effort on your part. To some college students, finances can be challenging and hard to manage. Finding the balance between spending, budgeting, saving and investing can be a great starting point when it comes to money.

As you move along in life and later get a career, you can get involved with more complex financing, like a financial planner, accountant or even an investor. But for right now, simple investments are just as beneficial to you as investing in your education or health. After all, who doesn’t mind a little more moolah.