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Buying stocks in college? Here are a few tips to keep in mind

Planning to invest in the stock market as early as college? Here are four things to take into account before opening your wallet.

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Investing is not just a potential priority for your parents and grandparents. If you’re interested in getting acquainted with the stock market and having opportunities to start building a stable financial future, there’s no reason to delay—even if you’re still in school.

Starting while you’re still in college gives you more time to save for your future than you’d get if you waited a couple decades or more. Like it or not, thinking about the future and planning for what’s ahead are parts of being a responsible adult. Stock market investments can help you get closer to financial goals.

You’re probably on a tight budget, but that doesn’t mean buying stocks is out of the question. It’s just necessary to have the right mindset during the process and not go overboard.

1. Consider mutual funds

Mutual funds are alternatives to individual stocks. They’re made up of portfolios of several kinds of stocks and may include other types of securities. They provide many of the same benefits of investing in individual stocks with less risk. For example, if one of the companies in your portfolio goes bankrupt, you don’t lose your whole investment.

Another advantage of mutual funds is they often don’t require hefty initial investments, and you may only have to invest $50 per month.

Although some mutual fund companies make investors contribute initial investments of amounts starting at around $1,000, many of them waive that upfront expense if you commit to regular monthly deposits via direct deposit.

Mutual funds are excellent possibilities for people that want to invest in stocks while being mindful of their budgets. They also work well if you don’t want to take the time to research the companies associated with individual stocks.

2. Calculate your risk tolerance

It’s crucial not to get overeager and invest more than you can afford. Also, before deciding the amount you want to invest, figure out your risk tolerance, which is the amount of variability you’re willing to handle. Several factors comprise risk tolerance, and they include your financial resources and your personality.

For example, you might have taken steps to manage your money wisely, meaning you have more saved up than most college students in case you have to deal with unexpected circumstances. Then, you may feel more confident about investing compared to people who don’t have as much saved up.

Before you get overexcited about the stock market, it's good to check on the calculated risks you are willing to take prior to investing. (Photo by DepositPhotos)

Before you get overexcited about the stock market, it’s good to check on the calculated risks you are willing to take prior to investing. (Photo by DepositPhotos)

If there’s a constant associated with the stock market, it’s variability. That’s why factoring your personality into the equation is necessary when assessing risk tolerance. If you are an anxious person by nature, that characteristic will likely reduce your risk tolerance and could cause you to sell stocks too quickly if they don’t perform as you hope.

Having a low tolerance for risk doesn’t mean you should give up on the idea of investing. However, it warrants being cautious and not getting involved to the degree that could cause you so much stress that it disrupts your studies and your overall quality of life.

3. Be honest with your broker

A stockbroker is a person that buys and sells stocks on behalf of clients. In your case, the stockbroker will likely work on behalf of a company you’ve chosen to assist with your investment purposes. When finding a broker, be truthful and mention you only want to start small.

You’ll have to look for brokers that are willing to accept small investments at first, with the knowledge that you might ramp up your investment activities if your financial situation allows.

4. Increase your knowledge of the stock market

Your time at college has probably gotten you accustomed to the idea of learning. That’s why now is the perfect time to consciously start making time to deepen your understanding of stocks, too.

You might listen to some podcast with advice from investing experts, check out some books on the subject from the campus library or go to a free lecture in your community for beginning investors.

All those things should help you feel better equipped to invest without feeling so confused. Remember, there’s no shame in asking for advice from someone you know who’s a long-time investor, such as a parent or uncle.

A realistic mindset goes a long way

You have to have rational expectations when it comes to your dealings with the stock market. Investing is not a way to get rich quick, and you must expect inevitable fluctuations in the economy that affect the stock market. Knowing what to expect before you get started will help you become a savvy college investor.

(Featured image by DepositPhotos)

DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions

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