Smart Investment Ideas for College Students

By on January 27, 2017

When it comes to investing, whether it be stocks, bonds or real estate, time is money. The more time you give your money to grow, the better chance you have at earning profits which, when reinvested, compound to build you a bigger portfolio. College students with extra cash should look into investing for their long-term future.

College is expensive and paying for it can be difficult for many families. Whether your parents are footing the tuition bills or you have loans, if you have extra money from a part-time job or gifts, you could be investing in stocks, bonds, real estate or other venture to buy a car or a home after college, start a business, pay back your loans or even save for retirement.

Students are in a prime position to set themselves up for a financially free future, however, investing is not something you should jump into without a little basic knowledge and guidance from a financial professional. Read up on investment basics, then speak with a trusted financial advisor to make educated and informed choices.

To help you get started here are a few ways to invest and hopefully through this process you will be inspired to put that extra money to work for you. From brokerage accounts to mutual funds, money market accounts to individual retirement accounts and real estate, here are seven investment methods which can bring you financial freedom after college.

7 Investments to Make as a College Student

Open a Brokerage Account for Stock Investments & Day Trading

Buying stock in a company is akin to owning a share of the company. Anyone can make money in stocks, but a student must be prepared to lose money. As students, you can take more risks and still have time to make up for any losses, however, it’s best not to micromanage investments or panic and sell when the market is falling.

Buying inexpensive stocks and holding on to them for the long term can really pay off. Consider opening an online brokerage account (with companies such as E*Trade, Fidelity, TD Ameritrade, ShareBuilder, etc.) and discuss your plan of action with a trusted broker or financial advisor. Day trading is possible for college students, but it does require a lot of time, attention and knowledge to be successful; the time required could distract from the little free time you already have in college, so proceed with caution.

Try Long-term, Low-cost, Low-involvement Index Funds & Mutual Funds

Along with regular stocks and day trading, college students can try low-involvement investment in multiple stocks (often referred to as ‘funds’). A low-cost index fund or mutual fund is a viable option for college students because it incurs lower fees and fewer risks.

These funds invest across a number stocks equally, limiting the risk of big losses when one company’s stock loses value. By equally distributing the investments across many companies the investor is unburdened by the stress of trying to ‘pick’ stocks, and fund managers do all of the work for you.

This is a relatively safe method of investment as it follows the market as a whole, which while unpredictable, is on a slow, steady climb in the long-run. Students can essentially ‘set it and forget it’ with these fund investments, although it is important to review your portfolio with your fund manager on an annual basis.

Bond Investments are Low-maintenance Too

Investing in bonds can bring small returns over times. Bonds are less like ownership and more like a loan for a company or government which is to paid back after a certain amount of time. Over this period, the bond distributed increments of money, called dividends, to the investor and the full repayment at the end of the term.

Bonds are not as risky as stocks or index funds but they make take longer to see significant returns. As a student, you may want to consider zero-coupon bonds, which do not require paying tax or an interest rate, or tax-exempt municipal bonds.

Open a Money Market Account or Certificate of Deposit

For students who cannot afford to lose any money in an investment, consider opening a high-yield savings account. A high-yield Money Market Account or Certificate of Deposit acquires a higher interest rate than a basic savings account, provided the student does not withdraw funds for a set amount of time.

These accounts do not accrue much interest and may limit access for usually 6-, 12-, 18- or 24-month increments. They are, however, insured and a highly safe way to earn some extra money you were going to save anyhow.

Students can open a MMA or CD with a bank, credit union or a financial firm. Some accounts require minimum balances and fees, so shop around for the right account for your needs. Additionally, if you take money out before the end of the term, you will receive the current market rate, which could be less than what it was initially opened; read your documents carefully.

Start Your Roth IRA (Individual Retirement Account)

It’s never too early to start saving for retirement. An Roth IRA is a great place for students to hold their money for long-term savings – think your 60’s. Even if the savings is very small, the amount will add up over the years. And if you have an IRA from a past summer job or other employment, transfer it to a Roth IRA so it can accumulate interest without tax liability.

Buy an Investment Property in the College Area

If you, your family or a group of friends have the money to put towards the purchase of real estate, consider buying a rental property in your college area. By renting out rooms, a separate unit or the property itself you may be able to cover the mortgage and/or generate a stream of profit income. And once you leave college there are options to sell the property for a new family home or keep it for continual investment income.

Consider Life Insurance if You Have a Spouse or Children

It is never too early in life to purchase life insurance. If you are a college student with a family or dependents, life insurance will be their financial safety net. Buying your life insurance early can help to bring down costs, depending on the policy.

Be sure you purchase a policy that covers a variety of accidents and conditions. Additionally, if you have a considerable estate – property, inheritance or trust funds – speak with a trusted agent for more information about permanent life insurance policies with an investment aspect to use for cash or to ensure your policy stays ahead of inflation.

Jump Start Your Financial Future by Investing Early

College encourages you to start thinking about tomorrow. And though it may not seem like it now, you are laying the foundation for future financial safety net. Saving a little extra and starting investments now can pay large dividends in the future. And if you think you are too young to invest, or that you don’t have enough money, think again.

College students have time on their side – and plenty of it, so get a head start. With a little professional guidance from a trusted financial advisor, some basic financial education and new online tools, it is easier than ever to start your investment portfolio. A modest amount invested now can bring big returns in the future.

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About Amanda Jensen

FSN college advice columnist - Amanda gives parents and students knowledgeable advice on college planning, tuition financing and scholarships. With up to date and accessible information covering everything from personal finances to federal government policies, she is determined to make the college experience a painless one for all party's involved. You can find Amanda on !

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