For many college students, the concept of investing can seem daunting. Between the costs of tuition, books, rent and groceries, even students with part-times jobs and financial aid can feel stretched to the financial brink. Despite these challenges, now is actually the perfect time to begin learning various money skills and strategies — including investing—so you can be prepared for life after leaving the Hill.
For many students, investing sounds like something that is only relevant once you’re older and saving for a huge expense like a new house or retirement. However, like any skill, money management is something that you get better at with practice.
You might be hesitant to invest because you would only be using a small sum of money. On the contrary, investing small amounts of money is one of the very reasons it’s good to invest now. The small mistakes you make now will be things you can learn from, while big mistakes in the future could really cost you. You wouldn’t want your first time driving a car to be in the Indianapolis 500, so why would you wait to start learning investing strategies until you are saving for retirement?
Other than gaining experience with investing, there are numerous other reasons why you should start your investment portfolio now. As the Talisman’s resident (see: only) money expert, I am going to dispel a few of the biggest misconceptions about investing and hopefully along the way, convince you not only that you should start investing, but that you are capable of doing so.
Myth 1: It’s risky
One of the great things about investing is that there is not one single way to do it. Thus, you can wade in however you feel the most comfortable, only taking on the amount of risk you are willing to take. Of course, with any investment there is some risk involved, but if you are willing to take on a bit more risk, you can potentially make significantly more profit.
If you are like the typical college student, most of your money probably sits in a traditional checking or savings account. While these are extremely low risk, the average interest rate is a mere .06 percent per year. Given that the inflation rate in 2017 was 2.1 percent (meaning, a dollar from December 2016 was only worth 97.9 cents in December 2017) you are actually losing money keeping it in a traditional account.
Meanwhile, U.S. Treasury Bonds (widely considered one of the safest investments) currently offer a 2.56 percent interest rate for 12-month bonds. If you want to invest directly in the stock market, your returns are far from guaranteed, but your potential gain is nearly limitless. For example, according to the New York Stock Exchange, the Dow Jones Industrial Average (an index used to measure the overall health of the stock market) is up 17.9 percent from this time last year, which is good news for all you want-to-be investors.
Myth 2: I need a lot of money to invest
While the word “investing” conjures up images of Wall Street and wealthy executives, investing isn’t just for people who have a lot of cash on hand. Many investing platforms like Robinhood and Acorns are currently attempting to appeal to millenials by lowering minimum balance requirements. This means you can often start a portfolio with as little as $5.
Myth 3: It’s super difficult
In the 21st century, you can have an investment portfolio that requires zero maintenance and zero fees. There are multiple investing platforms available for your use, and several of them have no fees while providing you with automated investing features.
Myth 4: Investing is for boring, old people
If investing seems intimidating, or you aren’t sure where to begin, don’t worry. Almost anything can be scary when you have never done it before. There are tons of resources specifically geared toward young investors, resources that I am hoping to help you navigate here at the Talisman. The great thing about investing is you can do as much or as little as you want to, in almost any way that you could want to. Whether it be investing in the stock market or simply switching to a bank account with a higher interest rate, I hope that this semester you begin to take an active role in the management and growth of your money. It will make life easier in the future — trust me.