Education

2022 Guide For College Students How to Invest Step-By-Step

While in college, you might engage in a job or two. This is a great way to earn a little money. However, unless you have some pressing need for cash, you might want to consider investing the money for the future. In this article, we discuss 3 steps college students can take towards investing while in college.

3 Steps College Students Can Take Towards Investing

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In this section, you’ll learn the steps you need to understand how to start investing. Here are 3 steps college students can take towards investing:

1.   Choose where to open a bank account

Gone are the days you had to consult investors (at a high price, too) to plan your investments. With the advancements in technology, you can easily buy stocks yourself for free.

If you’d like to buy stocks, there are several platforms you can use for free, with some even having mobile apps. Let’s go over 3 of them:

●     M1 Finance

This platform is a great way to start investing. You can easily invest in stocks and ETFs for free. M1 Finance allows you to build your portfolio and invest as well for free.

●     Robinhood

This is a nice platform if you’d like to invest in individual stocks or even trade options. Robinhood is also free, and so a lot of beginners like it. However, it doesn’t support fractional share investing, which means investing might be a little hard if you don’t have enough money.

●     Fidelity

Fidelity is a full-service firm that can also help you grow as you invest more and increase your number of assets. It’s a favorite among a lot of brokers. Fidelity also offers commission-free ETFs and also no minimum IRAs.

2.   Take time out to educate yourself

Now that you have opened your account and put in some money, it’s now time to figure out what to invest in. You might want to take out time to do research much the same way you might use essay samples to educate yourself on the right approach to an essay topic. After figuring out the funds you’d like to buy, you might have to pay a commission when buying it unless you’re using M1 Finance. After investing, you now take time out to wait and occasionally add money to your investment from year to year or month to month.

3.   Select the kind of account you would like to open

After choosing where to open your account, the next step is to figure out the type of account you’d like to open. For someone just starting out, here are 4 types of accounts you can open:

●     Cash account

This is the favored type of account among a lot of investors. You can purchase any type of security with the cash you have at hand. This type of account is preferred because you can access your money before retirement.

●     Margin account

A margin account is not too different from a cash account. While a cash account is opened with the money you have, a margin account can be opened with money borrowed. It also has some differences, such as shorting investments and selling uncovered options.

●     Traditional IRA

A traditional IRA account is different from a cash account as you can’t withdraw your money invested until you’re 59 ½ years old. One cool feature of Traditional IRA accounts is that you get a tax benefit for all money invested up to the limit, which can be $6,000 if over 50. However, you pay taxes on all money withdrawn after retirement.

●     Roth IRA

This type of account is similar to the traditional IRA account in that you can purchase any security you want. However, your investments don’t have tax benefits at the year of investment. Only after retirement are your withdrawals tax-free.

Conclusion

Investing is a great way to plan for the future, and as a college student with a lot of time ahead, this might be a good idea. While the markets can go up and down, you don’t want that to affect you. As long as you sit tight and discipline yourself, you have a good chance of reaping the benefits of your efforts.

Author’s Bio

Ashley Carter is a content writer and financial advisor. She uses her time to educate students on how to take control of their finances. Ashley enjoys skiing and traveling.

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