The Independent Voice of Southern Methodist University Since 1915

The Daily Campus

The Daily Campus

The Independent Voice of Southern Methodist University Since 1915

The Daily Campus

The Independent Voice of Southern Methodist University Since 1915

The Daily Campus

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Investing While in College

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I am currently in college and have been passively investing since I was little. For birthdays and holidays, my grandparents have given me stocks and bonds as gifts. For example, I have some Disney stocks. However, I don’t really know much beyond the gifts that I have received but am interested in learning a bit in the stock market and maybe short-term or day trading. What should I be doing or researching, and what strategies are available for college-aged students?

Stocks and bonds are a great way to start saving and investing. I applaud you for such an early start as, in investing, time is more important than money. The magic of compounding interest is the secret and the beauty of a successful strategy. Therefore, it is never too early to start trading stocks, bonds, or any investment vehicle. The more that you learn early on, the better it will be in the long-term as mistakes will happen. What’s more, these mistakes are cheaper to learn when you are young and have time to recover.

The Security and Exchange Commission (SEC), under the Office of Investor Education and Advocacy, created a guide titled Saving and Investing for Students. The significance of this is that the federal government recognizes the need for individuals to invest at an early age and the subsequent protection of investors. In the guide, the SEC recommends making a financial plan, developing a budget, and investing once debt is eliminated. Creating a financial plan involves having clear objectives regardless of what they are. These goals can be saving for a large purchase such as a car or starting early on a retirement plan. Once the goals are clear, prospective investors need to develop an understanding of their financial situation by knowing the money that comes in and the money that goes out to pay expenses. Once expenses are paid off, then those funds can be invested.

Most of the advice that you will see involves having a clear understanding of what you want to achieve. Ask yourself, why do you want to be an investor? The reason that this is important is that the objectives change the way that you should invest. For example, you mentioned short-term investing. This strategy is different because it involves moving in and out of positions within a year and sometimes quicker. Some of these strategies include using high risk high reward stocks such as penny stocks where, although the risk of losing the entire investment is high, the relatively low cost of the stock combined with the potential for a high reward makes the transaction attractive.

Long-term investing involves holding stocks for tens of years. Investors will evaluate a stock differently when using these differing strategies. If a potential investor is looking for a stock in the shorter term, the investor may look at specific products and projections within a year and how the market expects the company to perform. However, if the investment is for a longer period, then specific product or service behavior will not suffice. The investor will need to look at past and future performance and evaluate the business as one with a track record of proven and continuous product or service success. Such evaluation can include businesses within an industry that is ready to boom. For example, investors that believe that the rest of the states in the United States will legalize the use of cannabis may look at marijuana stocks as possible long-term investments.

Another popular trading strategy is day trading, which is the buying and selling of securities in a single day. The idea is to purchase a large number of stocks from a single company with the expectation that small fluctuations in price will produce a profit. However, this type of investment is risky because the price fluctuations may not be positive. Generally, day traders will select stocks with stable trading behavior and use candlestick patterns to buy and sell the stocks. Furthermore, day traders will need a large capital to purchase enough shares to produce a meaningful profit after paying commissions for the transactions. Regardless of what strategy you wish to follow, make sure to read a lot and research as much as possible. Start with small numbers and build your positions. Do not be afraid to look for advice on an ongoing basis.

All of these strategies do require capital, which if you don’t have the best advice might be to continue to focus on investing in yourself and your own education. The national average wages for employees with professional degrees is 18% vs. their less educated peers. Search through accredited online degree programs, which range from high-demand jobs in sectors like Computer Information Systems/IT and Marketing, to even Hospital Services and Nursing. If you’re a sensitive, caring person who finds meaning in living in the service of others, a Associate Degree in Nursing Program can get you on one of the most in demand career paths today.

“It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.” — Warren Buffett

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