7 Tips For Investing As A College Student

Key takeaways

• Investing early is one of the best ways to build long-term wealth, which makes your college years an ideal time to start
• Before trading stocks in college, you’ll want to set your goals, adopt a realistic strategy and determine what you can afford

A combination of savings, retirement and taxable brokerage accounts means you can secure your future and dabble in the stock market simultaneously

Most people don’t remember their college years as a time they were flush with cash. But, thanks to technology, investing is easier and cheaper than ever.

So why not get started in college? After all, you’ll never have a longer time horizon until retirement than when you’re fresh out of high school. Investing early means that your money has more time to earn compounded interest.

Not only that, but your college years are a formative time for building healthy habits. By laying the initial groundwork and starting your portfolio, you’ll get the hard part out of the way before you even graduate.

Download Q.ai for iOS today for more great Q.ai content and access to over a dozen AI-powered investment strategies. Start with just $100. No fees or commissions.

Investing early is one of the best ways to secure your future – as long as you build good habits, that is. Here’s what to know about investing while trading stocks in college.

Know your why

Before you dive in, consider why you want to invest. Having a reason to underpin your efforts makes it easier to stick with your plan long-term, especially during economic or personal financial instability. This “why” can be anything from retiring early to building long-term wealth to meeting life’s milestones.

Set your goals

Once you’ve determined your why, it’s time to set some long-term goals. Think about where you hope to be in a few decades – and then make decisions to get you there.

For instance, if you want to buy a house in 10 years, you’ll probably want to balance growing your wealth and hedging against a market downturn. But if you want to retire in 40 years, you may be able to afford more risk now.

Decide how much you can afford

Generally, you should stock up your emergency fund with at least three to six months’ worth of expenses before you start investing. You’ll also have to consider how your portfolio contributions fit in alongside expenses like rent, groceries and debt payments.

At the end of the day, you shouldn’t invest what you don’t have. But don’t despair if your budget isn’t bursting with extra cash. All you need to get started is a few bucks a month.

Adopt a realistic strategy

In college, a realistic investment strategy is one you can implement in your free time, between classes and studying. It also shouldn’t involve more risk or capital than you can afford.

Generally, this involves investing in low-cost, well-diversified index funds and exchange-traded funds (ETFs). These passive investments expose you to a wide variety of investments with just a little bit of capital.

If you prefer an active strategy, you can also look into actively managed funds or start trading stocks yourself. However, we generally caution against active trading approaches, as they often eat more time and capital than they’re worth.

Build your knowledge

One of the best presents you can give yourself is the gift of knowledge. Spend some time browsing reputable resources to familiarize yourself with investment lingo, market trends and strategies. (Personally, we think Q.ai is a great place to start.)

Commit to investing regularly

One of the best ways to build wealth is to invest regularly instead of trying to time the market. By investing a portion of your income each month—even just $5 a week—you’ll get to take advantage of strategies like dollar-cost averaging. Plus, you’ll start building healthy financial habits that will last well beyond your college years.

Sign up for a robo-advisor

Before you start investing, you’ll need to open a brokerage account. There are several options on the market today, including:

• Traditional brokers: Often offer a combination of online and in-person services and personalized investment advice. But they may cost more than the alternatives.
• Investment apps: Let you trade stocks, bonds and other securities on your own. However, their investment education and advisory tools may be limited.
• Robo-advisors: Use a short survey to assess your risk tolerance, time horizon and goals. Then, they build a personalized portfolio, generally consisting of investment funds.

Many college investors find that a free or low-cost robo-advisor, such as Q.ai, meets their needs just fine. (Did we mention that we also use AI to build our one-of-a-kind Investment Kits?) However, you’ll want to avoid brokers that charge fees out the nose, as they’ll eat into your investment gains.

How college students can put their money to work

You’ve done some research and found your “why.” Here are a few ways to get started.

Start with a high-yield savings account or CD

Investing isn’t just about trading stocks and bonds—you’ll also need a hefty cash reserve to see you through tight situations. You should stash cash you need in the short-term (under five years) in a safe environment, such as a high-yield savings account, a certificate of deposit (CD) or Q.ai’s Cash Reserve.

Unlike investment accounts, Q.ai’s Cash Reserve is backed by FDIC insurance. And while your money won’t grow as quickly as it would in an investment Kit, it has the potential to grow with reduced risk over time and will be there when you need it. (Learn more about the Cash Reserve here.)

Dabble in your taxable brokerage account

Regular brokerage accounts don’t provide the same tax benefits as retirement accounts. But they may offer more flexibility, as you can invest in more types of securities without contribution limits.

Plus, if you’re still interested in trading stocks as a college student (as opposed to just investing for your future), putting a few bucks into a regular account lets you do just that. Just don’t trade away money you can’t afford to lose.

Start investing for retirement

When you’re in college, retirement seems like a long way away. But retiring requires a lot of savings. (Experts generally say you’ll need at least one to two million socked away for a comfortable retirement.) The earlier you start investing, the more you’ll contribute over the years—and the longer your money can grow.

Open an IRA

An IRA, or individual retirement account, offers special tax advantages over regular brokerage accounts. These can be a great opportunity to build your savings and curate good habits. You can pick between two options:

1. With a traditional IRA, you don’t pay taxes on your contributions or gains. But in retirement, you pay taxes on all qualified withdrawals.
2. With a Roth IRA, you pay taxes before you contribute. Come retirement, you can make qualified withdrawals completely tax-free.

However, IRAs have downsides—namely, lower income phase-outs and contribution limits than 401(k)s.

Consider fund investing

Putting your money into low-cost index funds and ETFs is one of the easiest ways to start investing and diversify in a hurry. Passively traded funds may also come with lower trading costs and less volatility than trading individual stocks.

But index funds aren’t designed to grow your wealth fast. For that, you’ll have to look for actively traded funds or dive into growth-based investing. Just be prepared to accept higher levels of risk (and often bigger fees) as a trade-off.

Bottom line

No investment strategy is truly set-it-and-forget-it. Plan to check in on your portfolio on a schedule that makes sense to you, be that weekly, monthly, or quarterly. This will help you keep an eye on your performance and reinforce your long-term commitment to investing. You can also use these check-ins as an opportunity to reassess your holdings if needed.

And, when it comes to investing, consistency is key. Making regular contributions ensures a fresh supply of capital to grow your holdings. And the longer and more you invest, the bigger your portfolio can grow. While this method of trading stocks in college isn’t as exciting as day trading, it will make a massive difference in your future financial health.

Download Q.ai for iOS today for more great Q.ai content and access to over a dozen AI-powered investment strategies. Start with just $100. No fees or commissions.