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Why Every College Student Should Start Investing

Posted on 10/17/2020 2:34:17 AM by Ryan Calderaro

For most college students, investing is probably not something that regularly crosses their minds. And yet, now is the best time to start learning. Thanks to the tools we currently have available, young college students like us can start investing in the stock market with very little money. Learning about it now while we are still young will put us ahead of most other people who simply choose to ignore it… and the potential wealth it brings.

Investing in the stock market may seem like a foreign concept to many, but it doesn’t have to be. You can start by learning the basics from a site like Investopedia or the plethora of Youtube videos on the topic. Just spending a few hours learning the bare essentials will allow you to take your first step into the realm of investing. I would not recommend jumping directly into the stock market without doing some research first. Remember, this is your real money that you’re using. If you value it even a little, make sure you understand what the stock market is before you pour money into it. 

After getting the basics down, you’re going to need to make an account with a brokerage. Personally, I use Robinhood, which is free, beginner-friendly, and geared toward small investors. To start, all you need to do is download the app and sign up for an account. I don’t have experience with any of the other brokerages, but you may want to choose a different one, depending on your needs. 

Now, why should you spend your time doing all of this? Well, for me, there are 3 reasons: as a hobby, to learn and gain experience in the market, and to make money. I assume the one that catches most peoples’ eyes is money. Yes, the basic idea of the stock market is to invest money and hopefully make more money. Besides that, I actually find it fun to do, and I strive to gain experience and knowledge that I can utilize for the rest of my life. 

If you’re a broke college student with little money to actually invest, that’s ok. The goal at this stage is to learn and gain experience, not to turn a 5-figure profit. What’s great about many brokerages now is that they offer something called fractional shares. Fractional shares mean that you can own a piece of a company without having to buy one whole share. One share could cost anywhere from pennies to thousands of dollars. It all depends on the company you’re looking at- each has a different price, and it’s always changing. Let’s just say that you’re able to set aside $50 to invest to start. If you look at Apple’s stock price at the end of the day on 10/16/20, it was $119.02. Normally you wouldn’t be able to buy a share of Apple, but with fractional shares, you could buy a piece of one share with your $50. Fractional shares just make investing in large companies more accessible to small investors. 

If you don’t want to pursue investing as a hobby or you don’t want to be looking at your account regularly, you could always invest in something safe, like the Vanguard S&P 500 ETF (exchange-traded fund). If you don’t know what that is, don’t worry, I didn’t either before I started. Using this example specifically, the Vanguard S&P 500 ETF is a fund you can buy a share of, just like a regular stock. This fund holds pieces of hundreds of companies, essentially “tracking” the stock market itself. If the market does well in general, this ETF does well. Buying a share of something like this is considered one of the safer plays you can make in the market, and there is a very good chance your money will grow over time just by sitting there, with little effort on your part. My explanation really doesn't do it justice, so again, I recommend researching before you jump in. 

I hope this at least got you to think about investing. I really believe that every college student should learn about this, as it will prove useful for the rest of your life. Just don’t buy anything you don’t know about, though. Just because you bought a company's share doesn’t mean that it’s going to go up in value. It could also go down in value, and you could potentially lose money. There is risk involved, but if you play it smart and have an idea of what’s going on, you’ll probably be fine and may make some money. Personally, I don’t want all of my savings just sitting in a bank account, not doing anything. I figure that I may as well make it work for me. As Robert G. Allen said, “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.”

*This is not financial advice, and I’m not a financial advisor.*