Money is one of the resources which we have to manage to the best of our ability. One of the activities we can conduct to manage it is investment. This is where we use our money to buy an asset whose value we expect to increase over time. Hence, it can deliver a profit after sale. Investment is the process of increasing wealth by multiplying your money through the growth of an asset. In some cases, the asset is purchased so as to provide a future source of income instead of being sold. Some popular assets which we can buy today include stocks, bonds, mutual funds, Exchange Traded Funds (ETFs), annuities and certificates of deposit. Investing is necessary and an effective way of improving your personal wealth. With the Internet providing us with information about various trading markets around the world, literally anyone can invest their money regardless of age. Here are smart investment tips for teens and college students.
Increase your knowledge on investing
The best decision that a teen or college student can make is an investment in knowledge. You should always begin by reading about investment. There are books, journals, reports and news about this topic all around us. There are also blogs and websites on the Internet which are dedicated to investing. By reading through these sources of information, you can learn about various markets around the world such as the New York Stock Exchange and the Tokyo Stock Exchange. Reading also helps you to learn how to analyze assets before you invest in them. Examples of these are bonds, stocks and mutual funds. You also learn how to create an effective investment strategy. Even the most successful investors such as George Soros and Warren Buffet were not born experts in their fields. They had to learn the basics and then proceed to create strategies that helped them build fortunes. As such, teens and college students should begin by learning all they can about investment.
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Understand the value of money by working for it
It is important for a teen or a college student to understand the value of money. The best way to do this is by working to earn it. There are many establishments which offer part time or full time jobs. You can begin by taking up some of these jobs so as to learn the value of money.This experience can help you to learn that a pair of nice sneakers with a price tag of $199 is actually worth 25 hours of work at a job that pays $8 per hour. This perspective will help you invest wisely because you know the struggle behind all your dollars.
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Track some stocks on your own for enjoyment and learning
This is a tip that can help teens wet their feet in the world of investment. It is highly important to pick and follow some stocks of the companies which sell products that you know. Teens can pick some companies which are popular, have products that they buy and exhibit healthy growth potential. Examples of these are Disney (NYSE: DIS), Coca Cola (NYSE: KO) and McDonald's (NYSE: MCD). Simply identify their stock symbols and follow their performance over time. Try to make sense of their performance in relation to the news, financial reports and economic conditions. By doing this, you learn how to analyze a stock and learn about the factors which affect its performance. This is a great way to learn about the stock market and how to trade in a fun, relatable way.
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Pay your college debt first
Majority of the college students around the world graduate with substantial student debt. College education is expensive and often racks up debt that runs into the thousand of dollars. Therefore, for a college student who is interested in investing, it is wiser to pay off your debt first than risking your money in the financial markets. This is because paying off debt has a guaranteed return while the markets are not that predictable. For example, paying off $10,000 worth of student debt in full which has an interest rate of 15% is the same as making 15% returns on the debt amount. This is a return of $1,500 because you never have to pay any future interest on that particular debt any more. If you direct that amount of money in the markets, it is very hard to get a 15% return on your investment. Thus, if you are a college student interested in investing, begin by paying your student debt.
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Open up a trading account with a stock brokerage
After learning the value of money, how the world of investment works and have collected some capital, you may feel ready to invest in some real stocks. At this point, the first thing which you need to do is open a trading account with a stock brokerage. There are two main options available. You can open an account with an online discount brokerage or go to a traditional brick and mortar brokerage. The online discount brokerage allows you to make trades through a computerized system of trading. On the other hand, a traditional brokerage gives you professional investment advice on a one on one basis as well as extra services. As a new investor, a teen or college student should seek to open an account with a discount brokerage. This is because there is a lower initial capital investment. Moreover, you are only charged for any sales or purchases that you make. Seeing as everything today is moving to the Internet, an online investment brokerage account is far more convenient than the traditional brokerages. By giving you the freedom to make trades from your computer or through your smartphone, it is an ideal way to begin trading for teens and college students.
The Important Take Away
Spending your money to buy assets gives you the best interest over time. It is a tried and true way to create and maintain wealth. Today, teens and college students can take part in this activity. The tips above can help them to learn and eventually invest their money in the markets. Read and understand them so as to create a strong financial foundation and a promising financial future.