About the Author: Lucas Merat is a current undergraduate student studying Business Administration at Northeastern University. In addition to his interest in finance and marketing, he hopes to start his own company in the future.
As a third year undergrad obtaining my degree in business, my money is precious and limited. I save as much as possible while spending what I need. My business education has taught me that sitting on any money is ill-advised, as all money has the potential to grow if invested wisely. Even though I had the desire to invest, I was intimidated by the possibility of losing my hard earned money.
After a significant amount of research and a couple finance courses, I found that not all investing involves picking a stock priced low and buying it before it becomes the next Apple. Investing is all about balancing risk vs. return. If you are willing to take on more risk, you can in turn receive more return and vice versa. We as college students are very risk averse, meaning we cannot afford much of it. We are already investing in our own educations and therefore don’t have significant amounts of money to lose on the stock market. At the same time we don’t want our cash sitting in a savings account amassing only pennies of interest when it has the potential to return dollars. So how did I invest my money in the stock market? This is the process that worked for me.
1. I thought long and hard about how much I had to invest
You should only ever invest money that you won’t need in the coming months/years as spending money. Although you can always liquidate your investments if needed, it is better to invest savings that you don’t foresee yourself needing in the near future.
2. I found a low-commission online broker
3. I invested only in low-risk ETFs
ETFs are highly diversified funds that are managed by professional financial minds. Given in college we don’t all have the time to watch the market, it is far more secure to purchase ETFs instead. You can learn more about ETFs here, and find a list of historically well performing ones here.
4. I didn’t get wrapped up in the investing game
Once you start reading about stocks, you’re sure to hear about risky trading methods like day trading and swing trading. Unless you are ready to commit a large amount of time and capital to watching the market, you shouldn’t jump into higher risk investing methods like this. Stick to low-risk ETFs and you’ll see modest growth and won’t be at high risk of losing your money.
In short, I made sure not to be intimidated by the market, while also not getting too comfortable with it. If you follow this advice, your investing future is sure to be bright. Best of luck!