​Why College Is the Best Time to Start Investing

Lucy Wyndham  |


When you’re in college, it can seem like you have a million responsibilities to juggle, and the last thing you want is to add more things to your to-do list. However, all the energy you’re spending on school and budgeting is to make your life better in the future, and one of the best ways to ensure your future is to start investing early. Making money through investments can take the pressure off financially, and help set you up to have an income in the future.

If you invest $10,000 at age 20, it would grow to $70,000 by age 60 at a 5% interest rate. That same investment, made at age 30 would only yield $43,000, and at age 40, would yield just $26,000. That's a dramatic difference, and the only variable that changes in the calculation is how much time the investment is left to compound. Starting early, simply put, means you make more money over more time with the same, or even less effort. And, by starting early, you can learn quickly and make your mistakes on low-cost investments, meaning that you can reduce risk and virtually guarantee success later on. Starting in college has several advantages for a beginning investor.

1. You're in Touch with Trends and Young People

Investors are always looking for the next big thing, and spend millions of dollars each year trying to understand market trends. Because young people dictate many of these trends, being on a college campus gives you the amazing ability to do this market research for free. Pay attention to what the people around you are doing, using, and buying. If you hear about a new app, or game that people are using suddenly, research various investment opportunities to take advantage of your knowledge.

2. You Already Have Your Basic Needs Met

If you’re living in a dorm with a meal plan, you already have everything you need to survive. If you’re really serious about investing, you can take a few months off from partying and instead save money while at college and use it as capital for your investments. You’ll still have food and somewhere to live, so you can make your investments without worrying that you’ll suddenly lose everything. If you take $20 a week for a year and put it into an investment in a low-cost index fund (which costs less than continuously managed mutual funds), that's $1,000 in a virtually guaranteed investment that will grow consistently, and at the end of each year you can rebalance your investment and watch it grow with almost no risk, all for the cost of fewer pitchers of beer each week.

3. You're Getting Ahead of the Curve by Starting Young

By starting early, you can make your beginner mistakes when it doesn’t really matter and be ahead of everyone else who starts later down the line. Since you won’t have tons of money to invest as a beginner, starting with penny stocks and low level investment opportunities will help you generate money with little risk, and start you out a step ahead after graduating. Even if you pick a low risk investment like a CD that only returns 2%, the extra years you'll add by having started early will help make up the difference without forcing you to take on riskier investments later on to make the same amount. That being said, riskier investments are safer when you're young, so building up a diverse portfolio of mixed investment can help you cover all the bases strategically, while still developing opportunities to learn and make mistakes without ruining everything.

4. You Have Access to Student Resources

Student computer labs often have financial modeling software, free internet access, and even student tutors who can help you learn the basics of the stock market and investment trends. Take advantage of these resources, because when you’re not in college anymore, they suddenly become expenses instead of privileges. Your school’s library is also an amazing resource, and you could ask to meet with business or economics professors if you’re really serious about starting early and they’re willing to help out.

College is the best time to start investing, because you have unprecedented access to resources, support, and information. You'll learn how to spot trends amongst your peers, practice investing before everyone else, and all with limited risk because you're still having your needs taken care of. Take advantage of the tools at your disposal, and before you know it, you'll be an experienced investor who's out ahead of your peers because you invested in yourself early on.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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