How To Start Investing While You Are In College


College can teach you a lot about investing. But the market does not always work the way it does in theory. Managing a portfolio is the best way to bridge the gap between theory and practice. Nate Cuson, an undergrad at Vassar College, asks how to get started.

Start investing while you are in college. Shutterstock

Ken Kam: After two years of college as an economics major, what have you learned about investing?

Nate Cuson: The classes I’ve taken so far have all been focused on giving me a theoretical foundation of the subject.

Some of the Macro concepts that we touched on are relevant, such as how higher interest rates for bonds reduce the demand for investing in stocks and vice versa.

The things I learned in class, though, are difficult to apply to the real world, as everything is based on simplistic models using a multitude of assumptions, and the real world just doesn’t work like that.

Kam: Based on what you’ve learned so far, how would you invest right now?

Cuson: Based purely on the theory I’ve learned, I’d probably invest in bonds or indexes because those represent less risk and offer more consistent returns of growth.

Kam: Tell me about your investing experiences so far.

Cuson: I opened an account at Robinhood because they gave me a few shares for free at the start thanks to a friend’s referral. I visit the site occasionally to see how the stock is doing, but haven’t taken additional steps with my own money.

My parents have exposed me to investing a little by gifting me some Facebook and Apple stock for Christmas/birthday presents every now and then. So far, those have proven to be pretty successful.

Kam: Robinhood charges no commissions and has a nice app. But, I think what prevents most people from getting started is that at Robinhood, as with most brokerage firms, you need about $100,000 to buy a portfolio of stocks.

It’s important to think about your investments as a portfolio rather than a collection of stocks. A portfolio’s risk profile is not just the sum of the risks of the stocks you own. Your portfolio can do well even if you are wrong about some of the stocks. And, believe me, you will be wrong sometimes.

The learning comes from making decisions about which stocks to buy, when to buy and sell them, and how much to own. As you track the returns of your portfolio you will see what worked. You improve by doing more of what worked, and less of what didn’t work.

When you are just starting out, a bigger account does not add to the learning experience. A bigger account just means each mistake will cost you more money. It’s better not to put big money into your brokerage account until after you’ve learned how to invest.

A better place to set up your first brokerage account is FOLIOfn, who we work with, because they allow you to trade in fractional shares. This means you can put together a portfolio of 10 to 20 stocks with just $20,000 because you can buy just one-half of a single share if that’s what you want.

Cuson: That sounds great and I’ll definitely have to check them out!

Kam: The gifts you’ve received of Facebook and Apple might be a good way to fund your first portfolio. Would you consider doing this?

Products You May Like

Leave a Reply

Your email address will not be published.