The thought of investing money can be intimidating and scary, especially for college students who have a tight budget and limited resources. The majority of them are naïve and inexperienced and have no idea where to begin. Juggling between jobs and reaching the classes on time is already exhausting and overwhelming and with that, risking the hard-earned money is the idea that causes sweat to many.
Little do they know that college is one of the best places to start investing money. People with limited amounts of cash can even start and the upside benefit for them would be learning the dos and don’ts of making investments and how to deal with the losses without losing a massive amount of money. As a student, you might not have much money to invest, but money for making money is an old school idea. In today’s world, you can even start with a bare minimum amount; just know where to invest. However, it is equally important to educate yourself with all the options available to make an informed and wise decision.
Below mentioned are the 7 ways that can get college students started in investing with very minimum amount.
1 Consider a Low-Cost Online Broker
Being a young and enthusiastic individual, stocks might serve as a perfect and promising domain for you to invest. Yes, they pose a significant risk, but with time they give promising returns, and for that, you might want to opt for a low cost or free online broker. For that, you will have an online platform where the investors can create a trading account where you can trade stocks, mutual funds, exchange-traded funds and bonds. The best part is that some online brokers don’t even charge fees which is definitely a piece of good news for beginners.
There are plenty of efficient, low-cost online brokers available like Charles Schwab, Fidelity Investments etc. If someone is tight on budget and wish to have an online broker service for free, Robinhood and Webull are your best bets.
2 Opt for Index Funds
The safest option you can go with is making an investment in the index funds. Index funds are a type of mutual fund. When the money is put in an index fund, then that cash is invested in all the companies that have been grouped together to make a particular index. Take Standard & Poor’s 500 as an example. The S&P 500 is a single index that brings together the shares of 500 of the biggest U.S. companies that are publicly traded. It is an immensely diversified fund offering promising returns. The cost and risk of making an investment in an index fund are lower than the other options, and you really don’t need hardcore prior knowledge to get started, which makes it a fantastic option for beginners. The legendary billionaire Warren Buffet recommends investing in index funds.
3 Open a High Yield Savings Account
Another efficient way to skyrocket your savings is to sign up for a high-yield savings account. These accounts are similar to the regular saving accounts, but the only key difference is the interest rate. When you deposit the money, the interest rate paid by these accounts is around 10 to 25 times higher than what you get from your regular saving accounts. They also offer the option to withdraw your money any time you want. That being said, they are one of the safest options available.
4 Invest in Crowdfunding Websites
If you are fond of the idea of making an investment in real estate, then we’ve got you covered with the option of crowdfunding websites. It’s common knowledge that they issue loans for real estate investors, but with your limited investment, you can chip in a certain fraction as a fund for those loans and then you’ll get a certain percentage of return on your investment. Being a student with very limited resources, you must be aware of the fact that not all crowdfunding websites accept a small sum of money. Still, there are a few real estate crowdfunding websites available for everyone.
5 Get a Robo-Adviser
A Robo-adviser can be simply described as a comparative hands-off way to invest. It is an automated service that uses a computer algorithm and software to create and run an investment profile. Robo-advisers purchase funds for you as per your convenience. Even a novice investor can get started with a meager amount of money, and you can also top up the money with no additional charges. Robo-advisers usually charge 0.25% of your assets annually, but when there is a small amount in the account, they waive off the charges, which is a treat for young investors.
6 Investment Apps
With the rise of micro-investing apps, saving and investing little amounts of money isn’t a challenging job any more. The extra cash that is saved is invested in stocks with the help of micro-investment apps. Most of these apps charge fees for making the trades, while others trade for free until there is a certain amount in the account. One famous example of such a mobile app is Stash which helps you in purchasing stocks. You only need a small amount to get started, and the monthly amount is also very low.
7 Sign Up for an Individual Retirement Account (IRA)
Thinking about taking this very farfetched idea at such an early age might sound crazy to many, but the earlier you start investing in a tax-advantaged account, the more you can gain from it. It is quite a practical step towards securing your future on the financial front. It’s a tax-deferred investment account that helps you save for your retirement in the long run. With IRA, your dividends and profits and tax-free, while your contributions are deducted from your taxable income.
The most important key to growing your wealth is to make the right decision at the right time. Having numerous strategies for making money with a modest amount, lookout for the best time to invest, and you are good to go.
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