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Investing money while in college is based on the fact you have money to invest. If you’re the average student your time may well be spent lamenting the frugal life you lead.
This is why it’s important to have a clear plan and a predetermined set of investing money goals planned out before you get your feet wet. This involves doing a lot of research and gathering independent facts. One thing that can help you along the way is to focus on investing from the point of loaned and owned dollars. This strategy will help you get tax breaks, positive returns, and at the same time will help minimize the risk of investing. The first option is to loan out your money to either to a mutual fund, a common bank, a corporation, or the government.
The level you have to invest does have a bearing in one sense. If you have a few hundred dollars to invest you’ll probably be more willing to put it in riskier investments like small-cap stocks or even options. The only drawback for both of these is you need to do your research because with only a small sum to invest you cannot afford a professional to do this for you, so in between studies you may not have the time. The rich student can quite easily invest in mutual funds or long term stocks of established companies in the hope that over time these will out-perform the market.
For the rich student real estate is an option. Why not buy and live in your own property instead of renting, it may save you money. If you live with your parents rent the place out for a steady income. You can then invest that money to make more money. There are also stocks, bonds and commodities.
Conversely if the company does not perform well or if economic factors force the company into trouble the value of your share drops significantly and you essentially have lost your investment. However there are many benefits to this form of investing such as a much higher potential return then loaned money can give you. Also, if you go with a buy and hold strategy then there are certain tax advantages that you can benefit from to lower the amount of your return that is taxed.
The concept of diversifying comes into play when you split your investments between these two forms. This will involve both loaning out money with a set return and taking some risks by buying fractional ownership of businesses or mutual fund companies. As with all forms of investing there are still no guarantees and the best that you can do is to perform the best research and consult professionals before risking your hard earned money. It is very easy to get caught up in the hype that is out there with quick return and no work, so keep your head on straight and control your emotions when investing.
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