How To Invest As a Teenager or College Student – The Easy Way
You’re young and you’ve decided that you want to start investing but can you as a teenager or college student? Of course, you can and I’m here to help. You see, I was once in your shoes. I can remember vividly being a 16-year old wanting to get started investing as fast as possible.
Unfortunatley for me I didn’t really have any sense of direction. So instead of seeking guidance or a mentor, I did the only thing I knew and that was open a Scottrade account (now TD Ameritrade). Where did I learn this? Well, from a TV advertisement, not exactly the best advice.
Here is how you can start investing as a teenager or college student:
- Understand that while investing is easy it is not sexy.
- Know the advantages of investing when you are young.
- Learn what type of investment fits you.
- Get started!
Depending on who you are you may think investing is a joke but I can assure you it’s not. On the other hand, I’m sure there are some of you who think you can’t do this. Get that out of your head right now because anyone can invest and I’m going to show you how.
Investing Is Not Sexy
Sorry if this statement bursts anyone’s bubble but investing is not sexy. Is it easy? Yes, but definitely not sexy. We have all seen the YouTube ads where someone tells you how they made millions from investing. Whether this is in real estate, a dropshipping store, or something else. It sounds great and maybe they did make a good amount of money but millions? Probably not.
I always ask myself, if this person made millions then why are these people selling me a book on how to do it for three easy payments of $19,99. While I would love to call these people out by name I don’t think it would be the best idea to tease them into a lawsuit. All I can suggest is to use common sense and if it sounds too good to be true it’s because it is.
The truth is that investing isn’t sexy and it won’t make you rich overnight. Do people get lucky? Yes of course. My favorite story of this is when 50 Cent forgot he was paid in bitcoin and now it’s worth $7 million. This luck happens and I actually do believe teenagers and college students should take some risks on some speculative investments but it shouldn’t be their primary focus (more in a bit).
What your focus should be is building the boring habit of investing money into a low-cost index fund every single month. Month after month, year after year, and you will be a more successful investor than 80% of the U.S. population. I’m not even kidding.
Will this make you the next Warren Buffett? No, but it will set you up with a great nest egg.
Investing Young Has Huge Advantages
When you’re young the world is at your fingertips. This is especially true in terms of investing you have an opportunity to take advantage of something that most people don’t so listen up. This article isn’t about calculating how much you need to retire or a math problem on compounding interest but you need to review this chart.
I made this chart years ago and it is the one I show anyone who tries to tell me investing young doesn’t matter. As you can see there are four people Claire, Quinton, Danny, and Laurie. Each person took a different route in investing. The best part is they all invested the same amount of money and had the opportunity to do it over the same time period but not all of them did.
Only Consistent Clair took advantage of the opportunity at hand and invested early and kept investing over time. This is who I want you to be. I want you to start now, build the habit, and continue for your whole life. As you can see Consistent Claire became a millionaire. Who doesn’t want to become a millionaire?
On the other hand, you have people like Late Laurie who represent most of the population. This type of person waits until they suddenly feel the urgency to invest. They realize they want to retire in the next 10-15 years but they have no nest egg. Late Laurie invests the same amount as Consistent Claire but for 30 years less. The result of this is a retirement fund over $800,000 less.
Start young and you’ll forever be thankful.
Learn What Type Of Investments Fit You
Investing while you are a teenager or college student has other perks as well and that is in the optionality you have. This is where some of you may assume I’m going to hit you with the sales pitch to my pyramid scheme but not quite. What I mean is that you have more options than you may think.
I go over the different types of investment accounts in my article: How To Start Investing Today – An Investing Guide For Beginners. You should review that article after you have finished reading this but just know some of your options include:
- Traditional IRA
- Roth IRA
- Brokerage Account
- Health Savings Account
These types of accounts should be your building blocks for investing but there is another side of things I think you should consider. You see, when you are a teenager or college student you have the ability to take risks that older people can’t. You have bills, yes but comparatively your bills are small and so are your responsibilities. You may not think so but trust me they are.
Because of this, I would suggest you take some risks in investing. Before you think I’m telling you to go all-in on a penny stock or bitcoin let’s back up. What I’m suggesting is you max out one of the accounts I mentioned above then after that, and only after that, you can make a couple of smaller, riskier investments.
I did this when I invested in oil wells back in early 2014. I took a big risk and did it pay off? Well, somewhat. I was expecting a huge return and while I have re-couped my money and then some it wasn’t a huge hit. I’ll let this chart speak for itself and you can see why.
Yes, the bottom fell out of oil prices and it hurt my rate of return by a lot. Obviously, this was a risky investment and it somewhat worked just not like I fully expected. Compare this to my low-cost index funds in my Roth IRA who have been performing better than expected and you’ll see why I suggest you take some risks AFTER setting up a good base.
The Bottom Line
I really wish I could write this article in good faith with the secret to investing for teenagers and college students but I just can’t do that. No one can and anyone who says they can is someone you should run from. The truth is no one has a perfect way to invest all we have is data points that have proven to work overtime.
I can’t harp on it enough of how unsexy this is and it will be hard to sit on your hands and let your money work for you but it will all be worth it.
I’m putting my money down on what has worked for over 100 years and I would suggest you do as well. The combination of time, money, and patience always seems to pay it’s just up to you to get all three in line.
I have written a ton of helpful content on getting started investing at any age and I would love for you to check some of them out. I’ll list them below in order that I think you should read them. Seriously, take 30 minutes to read and I promise you’ll learn how you can set yourself up for a successful future. Here they are:
- How To Start Investing Today – An Investing Guide For Beginners
- How To Invest In Stocks, Mutual Funds, and Real Estate – My Personal Holdings
- 4 Reasons You Shouldn’t Trade Stocks
Thanks for reading!
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