I started researching investing at the age of 15 and started building an investment portfolio the year I started college. During my college years, I learned how to manage my investments without sacrificing my studies. Based on this experience, I offer five tips to help student investors get the most out of their college years and investments.
Important points
Before you begin, be aware of your motivations for investing. Knowing about investor psychology can help you avoid bad investment decisions. Before developing your investment strategy, consider your schedule. Take the skills you developed in school and apply them to your investment strategy. Connect with individuals interested in investing.
1. Ask yourself why you want to become an investor.
Before delving into how to invest, it’s important to consider why you want to invest. Contrary to what popular culture would have us believe, long-term investing success requires patience, hard work, time, and psychological discipline. It’s only been a few years since you’ve been in college, so you need to put in some serious effort to do well in your studies. Ask yourself if investing your limited time and energy is the right decision for you. Compare it to other major endeavors you could pursue, such as completing a second major, learning a foreign language, working for a professor, completing an internship, or joining a sports or community group. While it’s possible to do many of these things in addition to investing or studying at university, there are limits to how much commitment you can realistically sustain.
Different investors have different motivations. I know an investor whose goal is to fund the education of 1,000 children. Some people are motivated by the simple goal of building financial wealth for themselves and their families. My own long-term goal is to establish a philanthropic foundation that supports essential services in my hometown of Vancouver. Whatever your goals, having a strong sense of why you want to be an investor will contribute to your long-term resilience and success.
During a financial crisis, there is a temptation to sell investments at abnormally low prices to avoid further losses. Similarly, in an era of consistently rising earnings, it may be difficult to resist buying overvalued securities whose prices continue to rise. By thinking hard about why you want to invest, you can stay committed to your investment strategy through good times and bad.
2. Pay attention to investor psychology
As investors, our mental habits can be our greatest ally or our greatest enemy. As mentioned above, many investors fall into the temptation of buying high and selling low, which leads to financial disasters. This temptation is often exacerbated by social pressure. As investors, it is inevitable that we will experience self-doubt and fear that we are missing out on other investors’ gains. However, you need to resist this tendency to avoid the temptation of seeking short-term gains.
Universities can be a particularly difficult environment in this regard. On the day of new student orientation at my university, the student union president gave a speech encouraging students to approach university life with a healthy dose of FOMO, or fear of missing out. Still, I thought this was terrible advice for investors.
One of the best ways to avoid making bad investment decisions is to learn about the nature of investor psychology. Two of my favorite books on this subject are Animal Spirits, written by Nobel Prize-winning economists George A. Akerlof and Robert J. Shiller, and Your Money and Your Brain, by Jason Zweig . Reading these books will help you strengthen your understanding of the deep role that psychology plays both in your own decision-making process and in the financial markets as a whole. Understanding the psychological aspects of investing can help you avoid irrational investment decisions.
It’s not illegal to invest money from your student loans, but if the federal government finds out, you could be liable to pay back the subsidized interest.
3. Adopt a realistic strategy that takes your schedule into account.
Performing a thorough investment analysis requires considerable concentration and time. As a student, you have little time to delve into research. Therefore, it makes sense to adopt strategies that can be realistically implemented in the limited free time available.
Perhaps the simplest strategy consists of investing regularly in a portfolio of diversified investment funds, such as index funds, exchange-traded funds (ETFs), or mutual funds. This approach can be advantageous for investors who are less interested in performing detailed analysis of individual investments and prefer to outsource the more laborious aspects of investing to third parties. On the other hand, investors who want their funds actively managed must pay service fees in the form of higher management fees.
Full-time students who want to manage their own portfolios need time-efficient investment strategies. I decided to build a portfolio primarily based on businesses priced below liquidation value. I chose this strategy because it is more suitable for quantitative analysis and monitoring. For example, we have created a standard investment checklist to screen investment candidates. The checklist determined the exact price at which I would buy or sell that company’s stock. Then, use a service like IFTTT to set up automatic alerts to notify you when a stock reaches a specified price threshold. Through this strategy, I was able to gain real-world investing experience without sacrificing my studies.
For students who want hands-on investing experience but don’t have the funds, a third option is to invest using an online simulator, such as Investopedia’s stock simulator. Simulators are a great way for investors to test new ideas without risking losing real money.
4. Invest in knowledge
If you lack time or resources to invest during your student years, it’s worth remembering that developing your own knowledge is the best investment you can make. This principle applies equally to students who have the time and resources to invest.
Depending on your chosen major, your university studies may contribute directly to your investment education. You may need to find creative ways to find overlap between your education as an investor and your college curriculum. The major I chose for myself is one that emphasizes history and focuses on the history of science, and is not directly related to investing. Nevertheless, I found that many of the skills I developed, such as primary research, writing, and critical thinking, were clearly applicable to investment research and analysis.
Regardless of your chosen field of study, if you are active in your investment education, you will find many industry experts available to answer your questions and help you grow as an investor. We strongly encourage student investors to attend networking events and connect with industry professionals.
Another way to build your investing knowledge is to learn from the world’s greatest investors. I decided to gain knowledge based on the value investing method developed by Benjamin Graham, Warren Buffett’s mentor. I recommend “The Intelligent Investor” by Benjamin Graham. Another classic is Securities Analysis, which Graham co-authored with David Dodd in 1934. To understand how value investing has evolved since Graham’s time, I highly recommend studying the letter Warren Buffett wrote to his holding company shareholders. , Berkshire Hathaway (BRK-A, BRK-B). The letter explains how Buffett has implemented and extended Graham’s value investing principles. These letters are especially helpful because Buffett admits his mistakes and is remorseful. Buffett’s letter to shareholders and Graham and Dodd’s classic writings, taken together, provide a comprehensive introduction to the theoretical foundations and practical applications of value investing.
5. Keep in good company
One of the best parts of being a student is the opportunity to connect with different people on campus. In my experience, a network of peers discussing investing has helped me develop a more nuanced investment decision-making process. The key is to find people who are interested in discussing investments and willing to engage in constructive discussions.
Of course, this is easier said than done. Building this network required me to be open about my passion for investing. It took me until my senior year of college to overcome my inhibitions and launch an investment website to share my thoughts on investing. I was surprised by how many people I never thought would be interested in investing approached me with questions and feedback about my work. For the first time, I started building a network of peers to discuss investment ideas with.
The long-term value of a community like this cannot be overstated. At the same time, it is important to note that people tend to emphasize their investment successes and hide or downplay their mistakes. Therefore, it is wise to approach investment discussions with a healthy degree of skepticism.
What percentage of college students invest in stocks?
A Gallup poll conducted in 2023 found that 41% of Americans ages 18 to 29 say they have at least some money invested in the stock market; It was lower than any other elderly group. The survey also found that people who attended college had higher investment rates than those who did not, with 78% of college graduates saying they invested in the stock market, compared to 78% of college graduates who said they invested in the stock market. 41% said they invest in the stock market.
How much should an 18-year-old save?
According to Bank of America’s Financial Wellness Tracker, people between the ages of 18 and 25 should aim to save 0.1 times their salary for retirement. However, given the rising costs of higher education and the overall cost of living, it can be difficult for young people to achieve these goals. According to a 2024 Forbes Advisor survey, nearly one-third (32%) of Gen Z respondents said they currently have less than $1,000 in total savings.
How should college students start investing?
It’s never too early to start investing. Start by creating a budget and deciding how much to invest after covering your expenses. Think about your risk tolerance and how much money you’re willing to lose. If you want to be more risk-averse, you can start by opening a certificate of deposit or investing in bonds. If you can tolerate more risk, you can also start investing in stocks. Investing small amounts of money regularly, such as $10 a month, is a good way to start.
conclusion
Learning about investing while in college can be difficult. Students who approach this challenge with a clear sense of purpose, a realistic investment strategy, and a determination to learn from the best investors will be able to use their college years to build a strong foundation for their future investments. Masu. who knows? Someday, students may learn your investment philosophy.
