Opinion | Investing as a college student is confusing but important — here’s how you can get started

By Ben Mankowski, For The Pitt News

Investing, cryptocurrency and stocks are all commonly associated with college students studying business, somewhat understandably. Students on other academic paths rarely bat an eye to these topics, unless to joke about the widely held belief that only frat guys are investing. This isn’t true, but if it was, frat guys would be the smartest people around.

Every single college student in the country should invest for their future in one way or another. This can include putting money into stocks, bonds, ETFs, IRAs, cryptocurrency or even physical objects such as artwork if you are so inclined. In layman’s terms, all of these “options” are assets or bundles of assets that can give you a long-term return on your money.

Even with this knowledge, why should you invest to begin with? For starters, every year the cost of living in this country rises based on inflation. With the average retirement age in the United States being 61, this only gives current college students around 40 years to prepare for even higher prices.

Retirement aside, extra cash on hand from passive investment growth can act as a “rainy day fund” in the short term, or maybe help pay off that student loan debt we all cherish. The rise in average student loan debt per individual coupled with the rising cost of living presents a golden opportunity to prepare by investing early. There are endless possibilities for what your returns can pay for as long as you play it safe with your future in mind.

The problem arises from college students lacking both patience and knowledge on how to get started. Students may understand the why but lack the proper tools to execute. Treat this as a bare-bones beginner guide on how to start investing.

First, you’ll want to assess your financial situation. Are you employed? Do you have excess income or money sitting in your bank account? Can you spare time in your day to check the status of the financial market? These are all important questions that can determine if you are ready to invest. The worst mistake someone can make is not being financially prepared at the start of their investing journey. If COVID-19 has taught us anything, it is to always be prepared for the worst.

Once these questions have been answered and you have money set aside to invest, a brokerage should be chosen. A brokerage is a platform that an investor uses to buy assets. Most notable are companies like Robinhood, TD Ameritrade and ETrade that offer users a simplistic platform to invest. Robinhood is the most user-friendly out of these three with the most mobile oriented interface directly marketed to beginners. All you need is a smartphone, confirmation of your identity and a linked bank account to be halfway to investing.

The process gets trickier after you make your account. Words will be thrown at you, such as “options trading,” “limit buy,” ”stop orders” and tons of other trading lingo. For the sake of simplicity, the only words you need to focus on are “market buying” and “market selling.” A market buy order is the quickest and simplest way to purchase an asset at its current price.

Executing some market buy orders and building out a portfolio, or list of purchased stocks, is where more freedom is allowed. To do so, you must take your time and choose a wide range of companies. If you invest all of your money into Tesla, for example, and Tesla’s stock loses 5% of its value in a month, your entire portfolio loses 5% of its value. What you want is a diversified portfolio. Simply put, this is investing your money across different companies, areas of interest, such as tech and pharmaceuticals, countries and costs of stock. This gives your portfolio a cushion to guard against fluctuation in the market. If two stocks you own go down, chances are the others you own will not follow the pattern if they belong in other sectors of the market.

Monitoring your beautifully diversified portfolio is all that needs to be done now. If a stock skyrockets above the price at which you purchased it, you can sell and gain the profit. On the other hand, if a stock falls drastically, you can either cut your losses and sell or hold for an eventual resurgence. I tend to take a more hands-off approach, sitting through the ups and downs of stocks only looking for a positive annual return. Any of these strategies can be executed as long as you find the one you’re most comfortable doing.

With this step-by-step strategy for some beginners, it may seem overwhelmingly simple to follow and execute. For others, it may take weeks or months to get the hang of it. Even though this is the case, the market is a volatile place, leaving even the strongest strategies vulnerable to negative growth. If this was relatively easy to get a hang of, I recommend doing some outside research on more complex investment strategies and components. TD Ameritrade has a whole course on investing from the beginner level to the most advanced.

This knowledge won’t make you Warren Buffett and it can’t guarantee you’ll make any money at all, but it is wise to start investing early and avoid the what-if question later.

Ben Mankowski writes primarily about economics, politics and personal advice. Write to him at [email protected].