Your Questions About Investing Tips For College Students

John asks…

How should an 18 year old begin investing?

I am 18 years old, and a first year student in college. I am looking to pursue a career in law enforcement when I graduate with my bachelors degree. That aside, I am looking for some tips on how/if I could/should begin investing.

I’m not looking for big risk, like putting money into the stock market. I only have about $1,000 in the bank currently, some of which will be gone after Christmas, the rest of school, etc. so I’m not looking to start right away.

However, this summer I plan to work and make at least a few thousand dollars, some of which I would like to begin investing. I have heard of people just starting to buy CD’s when they are 18 years old and working up to become millionaires that way, though that might be a little bit extreme.

My question is, how should an 18 year old student begin investing money? Is it a good idea to start now, especially when the economy is doing so badly? What is the best kind of investment to make at a young age, with a good yield over time but not too much of a risk? Please give details, I have a basic knowledge of economics but I’m no economist by any means.

John answers:

The #1 rule of investing is NEVER invest in anything you don’t understand. You need to become familiar with the type of investments you will buy.
A good place to start is money market funds. These funds invest in very short term loans to major companies and carry very little risk. In the long term (5 years or more) stock mutual funds have historically jhad the best returns of any investment. That includes every major downturn in the history of the US stock market.

Ken asks…

How do I start out on the stock market?

I am a college student and I am making a bit of money on my own now so I’d like to start investing a little, not too much but at least some to get me started. I was wondering if people could give me some tips on how to start out. For example: is there a good website out there to help me manage my stocks? About how much do I need to invest to make it at all worthwhile. What kinds of companies are good to start out with? Any advice will be helpful.

John answers:

The short answer: educate yourself on the stock market, invest in an index fund and practice.
There is no hurry to investing in the stock market, it will always be there. First thing you should do is educate yourself. There are plenty of good books on stock market investing, look for Warren Buffet, Peter Lynch, and I recommend the Motley Fool. The Motley Fool website has a bunch of information on getting started as well. Http://www.fool.com . As you save up money you can start putting it into an index fund (historically they average 11% annually) while you learn how to invest. Next I would recommend setting up a mock portfolio, research different stocks and experiment with different strategies until you find one you are comfortable with. You can track a mock portfolio with Yahoo! Finance or quicken, and I believe http://fool.com has mock portfolios as well. Patience is the most important virtue you can have as an investor, it will behoove you to begin early. Good luck.
I write a blog that teaches stock market investing to a generally military audience. You might find it useful:
http://semperfinance.blogspot.com
a post on qualities of a good investor — http://semperfinance.blogspot.com/2008/06/why-marines-should-invest-in-stocks.html

Jenny asks…

Has anyone used stock-trak before?

I at the end of my junior year at UCF. For my financial markets class I need to invest $1,000,000 (fake $) in the market to get a feel for it. I know how the market works but I have yet to invest and money, mostly b/c I am a broke college student. Any tips? What companies would be a solid investment in at this point? How does selling short work?

John answers:

The financial sector- banks and real estate have been hit really hard and are way under valued now.

Selling short is like selling a stock right now, with the requirement of buying it in the future. So, you absolutely need the stock to go down in price or you could loose A LOT of money. Selling short is considered very risky and you can actually loose more money than you invest to sell short.

George asks…

I’m looking to open a etrade account what account should i open?

Hi!
I’m trying to open a etrade account online what account should i open?
I’m a college student 20 years old and i’m trying to invest around $200 to start off with.
Thanks for the help and tips.

also if you have other places where you think it’s better to invest let me know i highly appreciate it thanks.

John answers:

Depends on what you want to do. If you are actually looking at buying a stock…you are going to have to be very sensitive to commissions. Etrade will run you about $12/trade, which is 6% of your $200. It’ll be very difficult to make money if you are paying 6% of your account every time you want to buy and sell. TradeKing would be a better option at $4.95. Still 2.5%,..bad but better than 6%.
If you are doing it to learn, and have some skin in the game, that is one thing. If you are actually looking for positive returns…that is very unlikely.

If you are looking for mutual funds…I think there are better options out there than ETrade. Margin accounts require $2K…so that isn’t an option. I’d look into some sort of an account with Vanguard if you are going to go the mutual fund route.

Betty asks…

How would you invest…?

Hi. I just want some advice on investment options. I’m a college student with about 2,000 dollars to put into investments. I currently have two savings accounts and am looking for ways to diversify and make a little more money (college is expensive!) from investing. If anybody could give me tips on how to start investing in the stock market or elsewhere, that would be greatly appreciated.

John answers:

There is not a “best” form of investing. You have to determine a few things.

1- your level of risk tolerance
2- your investment goals

once you know these things you can decide between individual equities(stocks) or bonds(fixed income) or mutual funds. Be careful with options though. They are more risky. If you have a high tolerance for risk, than small and mid cap stocks would be the way to go. They have the best potential for high returns in shorter amounts of time. But the caveat to that is they are more risky. Make sure you learn how to read the balance sheets, and cash flow statements. You need to learn about the companies. Listen to the conferance call. Look at their histories, management, and what they are planning to do in the future. There is a lot of research and homework that you have to do to really be sucessful with individual stocks.

If all that is not your cup of tea, than mutual funds are a better way to go as you dont really need to do much research at all.

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