The pursuit of money is a shared goal among people from all walks of life. For the millennial generation that is constantly burdened with debts and loans, one of the ways to pursue the almighty dollar is through investing in the stock market.
For most, this is a particularly daunting method of earning money because of the inconsistency of the stock market. The stock market should never be used as a primary source of income, but if used correctly, the market can be a tool to greatly improve one’s financial well-being.
The stock market’s volatility was put on display these past weeks when it suffered the worst point decline in history. On Feb. 5 the Dow took a near 1,600 point hit, equating to a near 4.6 percent loss. The prospect of entering a bear market like this is usually what stops many prospective investors from putting in their hard-earned money.
When it comes to the stock market, we as college students have the two most important elements to being successful on our side: time and knowledge.
Time is critical in acquiring wealth through the stock market because of the time that it takes for money in the market to grow. Early investing into stocks like index funds can have incredible return results later on in life because of the funds using compound interest. By depositing money into index funds, “you earn interest on the money you deposit, and on the interest you have already earned,” according to the Australian Investment Commission.
When estimating expected savings with compound interest calculators, it’s easy to see why Einstein is alleged to have said “compound interest is the most powerful force in the universe.” Students who begin investing in these funds during or immediately after college can expect to have a cushioned retirement savings during their later years in life.
Warren Buffett once remarked that experience is the most crucial driving factor in being successful in the stock market. As students, we have access to an array of resources that will give us experience in stock market investing. The most obvious, and perhaps most effective way of doing this is through taking courses to learn about the workings of the stock market. For example, BUS 225 Personal Finance is a course that covers “investing (mutual funds, stocks, etc.) annuities, deferred savings, insurance, retirement planning, estate planning and real estate finance.”
It is important to always remember that not everyone has the market acuity of Mr. Buffett. The market is a volatile place that will likely result in the occasional loss of revenue along the road. Our youth, once again, is advantageous because of the amount of time that we have to learn from the investment mistakes we make along the road. A loss of income now would of course be disappointing, but at this time in our lives it is far from being debilitating for most of us.
Being at a university can confer knowledge through the resources that we are provided with. Through using our student email accounts, we can take advantage of discounts to helpful stock market news sites such as the Wall Street Journal.
In addition to these passive methods of gaining knowledge, a successful investor will also need to get started on active methods too. Hands-on experience will give new investors the real-world knowledge they need to be successful.
The Robinhood app is an excellent way for an investor to get their feet wet without having to pay transaction fees. The app gives you access to stock trading options through your phone, and also allows you to monitor stocks. The user-friendly interface that Robinhood has is also great for beginners because of how easy to navigate it is. Robinhood’s lack of financial gatekeeping allows for people to trade stocks with minimal amounts of money, a feature that is perfect for college students.
Another great app for beginning investors is the Acorns app. This app provides a helpful, straightforward interface like the Robinhood app, but also comes with the bonus feature of allowing users to invest the change of their debit and credit card purchases into a portfolio of index funds made by Harry Markowitz, a Nobel Prize-winning economist. The app does, however, require a monthly fee for continued usage which could reduce potential earnings (although it is free for up to four years for college students with a .edu email address).
Any student who is interested in saving up money and is willing to put in some effort to do so should take it upon themselves to start investing immediately. As the old cliche goes, “time is money,” and in no area does time count more than in investing.
