College may not be the ideal time to start thinking about your retirement or buying a house, but that is the best time to start investing. By beginning to build capital early, you can get ahead of the game and build your nest egg early. This all sounds great, but where do you begin, when most of your income is going to tuition, textbooks, housing, and meals? Here are a few ways you can start your financial portfolio, while you’re still working towards a degree.
1. Index Funds and Mutual Funds for Convenience
Aside from representing a low-risk way to compound your original investment, mutual funds and index funds also limit the need for your personal involvement. Such funds are attractive because they invest in multiple funds. This limits the chances of suffering a significant loss, while simultaneously maximizing the probability of earning modest gains. These are good investments for college students because the fund managers control the investments. They know which stocks represent the most promise, so their expertise helps you to make money and save you the time of having to invest and monitor stocks yourself.
2. Invest in Bonds
These are great for saving time and protecting against loss as well, though the returns are smaller than those seen from funds it is one of safe high returns. The bond is purchased and good for a specified period of time. Essentially, you’re loaning money to the government, or, depending on the bond, to corporations. The interest is paid in the form of dividends and the full sum is returned to you at the conclusion of the term.
3. Money Market Accounts
This is one of the best investments for college students who don’t want to accept any risk of losing their investments. The returns are smaller than those possible with other kinds of investments but still more than the interest paid on standard savings accounts. The restriction here is that the investor cannot withdraw funds for a predetermined period of time, usually between 6 and 24 months. The benefit that makes a money market account (or, similarly, a certificate of deposit) attractive is that the deposits are insured, providing security while also allowing the student to earn interest on his or her capital.
4. This is a Good Time to Start Your Retirement Fund
Today, the cost of living is already high enough that extra money to invest is difficult to come by. This alone is a good reason to consider starting your Roth IRA (special retirement account) as soon as possible. In looking at how to invest as a college student, this may be the best option overall. Your investment will multiply over the years, helping you to build a good bundle for your later years, and anything you earn is tax-free until you withdraw it at retirement age.
5. Invest in Online Forex Trading
For those new to this type of investing, Forex is short for foreign exchange, so this involves trading currencies as opposed to the company stocks seen in the stock market. In forex trading, you’re leveraging your investments based on how you think the currency of one country will perform against the currency of a second country. For instance, if you believe the value of the euro will rise in comparison to the value of the U.S. dollar, you would buy EUR/USD. When you think the euro will lose value, you would sell EUR/USD. The value is based on the spread, which is the difference between the buy price and the selling price. This is of particular interest to college students because it doesn’t require hours of monitoring charts. Instead, the trader can log into his or her account, when there’s a little bit of time to check on the investments or hold onto those purchases for an extended period. Much like trading stocks, there are several strategies from day trading to long-term investments. In order to speed up Forex transaction, using VPS hosting is highly beneficial to trading and probably makes a lot more sense for currency traders.
6. A Direct Stock Purchase
What is a ‘Direct Stock Purchase Plan? A DSPP is A direct stock purchase plan. DSPP is an investment service that allows individuals to purchase stock directly from a company or through a transfer agent? Not all companies offer DSPPs, and the plans often have restrictions on when an individual can purchase shares. Here is an option that offers great potential, but comes with an increased chance of risk. Instead of going through a broker who will charge a commission each time you buy or sell a stock, you buy the stock directly from the company. You agree to invest a predetermined amount each month and, as the price of the stock fluctuates, so do the number of your shares. This might be viewed more as a stepping stone or an educational experience for those interested in pursuing day trading more fully.
These are just a few of the more promising ways to invest your money, while still pursuing an education. They offer minimal risk and an opportunity to begin saving without having to keep a constant eye on your investments. For those reasons, these may be ideal for young college students eager to get ahead of the game.
Thanks to Caroline for providing the content for this guest post.
Caroline is a writer with years of experience in business administration. She enjoys meeting new people and reading more books to get inspired for her own book. Find her on Twitter, @BCarolinebird12