Investing in Stock as a College Student, Recommended?

<p>Just thought I'd put the question out there. Let's say that the college student makes about 5k to 7k a year, would it be advisable to put 500 to 1.5k of that a year in stock? Are there issues around financial aid that prevent this? </p>

<p>I'm asking the question because it looks like I'll make more this year than my summer and school year work expected contribution, and I'd like to invest wisely with the leftovers, if possible. Plus I thought I'd gain some investing experience.</p>

<p>Investing for experience is probably good. But you do realize that if you actually make any money, Captial Gains Tax takes about 20%. That's a huge cut. And then there are "investment fees" from the broker. Invest wisely and whatever you invest, realize that it is technically gambling; you could lose everything.
A CD is a safer option.</p>

<p>Investing is an absolute must. Avoid picking your own individual stocks, unless you are independently wealthy and can have a portfolio with several hundered different stocks. Opt for mutual funds, particularly agressive ones in emerging markets and growth oriented domestic stocks. Of particular interest is an index stock, particuarly Vanguard's Standand and Poors 500 which only charges 2/10 of a percent to operate. At your age, and if you do not need the money in the immediate future, realize that loan-oriented investments (bonds, CDs, etc) will more than likely not meet your longtime goals. Most importantly, do not go into debt unless the funds are used for an investment such as your education or real estate. Never forget the power of compounding- that $15,000 you have now could be worth $1,000,000 in a handful of decades.</p>

<p>Just one more thing, if you make the money and it is taxable, i.e., your employer gives you a W-2, invest the money into a retirement account. The Roth IRA is of particular interest if you plan on having a high-income profession since you pay taxes on the money you put into the fund, not on the money you eventually take out. It is also useful if you want to retire early, since the principle can be collected without any penalty.</p>

<p>so I'm probably hearing that it is better to invest in the long term, because of the capital gains tax, etc., and because we're not dealing with that much money here. It would be a good source for experience though! i have a shortlist of stocks that I'm looking at for longterm (5+ years). Any other suggestions? What if one were to try the short term stock market. too risky?</p>

<p>thanks rocket-resellers, that sounds like good advice, I'll think about it! it would mean a change in strategy a little bit for me, but I'm open to it!</p>

<p>The other thing you can do is pick a list of 5-10 stocks in a specific market sector that is upcoming and offer you dividends. For example, investing in microsoft and apple right now would mean that if one takes a hit, the other will likely make a reasonable gain. Since both stocks are also paying dividends, you will receive a check from both companies simply for owning the stock. Investing is never a bad idea...just don't waste your money buying high-priced options and taking obscene risks such as putting all of your money into the abyss of foreign stocks.</p>

<p>have you taken a look at DRPs?? (pronounced DRIPS) a dividend reinvestment plan...they tend to be good for students since you buy them directly from the company in question and as such do not incur brokrage fees and whatever dividends the company is paying out get directly reinvested into the company...most DRP's even allow you to purchase stock at fractions which has its advantages if you cant afford to buy a full share of the stock..instead you can buy 1/2 or 1/3, etc. depending on the company</p>

<p>only downside is that some companies put a minimum on how much is needed to start a DRP with them and any income from the dividends, reinvested or recieved, is subject to tax....still research some companies you like and you might find somethin that fits your needs....</p>

<p>if i missed anything then im sure rocket-resellers can cover it =P</p>

<p>There's certainly a number of avenues that you can choose. Traditional and Roth IRAs, bonds, mutual funds, and the general stock market. One of the things that concerns me is your choice of investment. Understanding that your income is low, it might be advisable to choose a different investment route. One reason being the amount you wish to invest at each particular time. For instance, let's say there's about $200 left over each month. To invest $200 each month, you'll face comission fees of anywhere to $10-50 per trade. Therefore, to initiate the trade you're already at a loss of 5%-25% just to buy the stock. A way to avoid such a loss would be investing in a no-load mutual fund such as a Vanguard fund that invests in the four basic industries. These funds are particularly good for individuals interested in investing but haven't understood the full scope of the market. One it provides individuals with a fund that is well diversified and two, its spread out between the industries and three, there's no comission fees but of course each fund has a small yearly fee. Therefore, a novice can monitor the overall market and get a good feeling of how well the fund is doing.</p>

<p>One tip, don't dive into the stock market without knowledge of how it works. Especially, the technical and the overall broad views of stock flucuation. It would be reasonable to seek the advice of a broker.</p>

<p>quote: "Never forget the power of compounding- that $15,000 you have now could be worth $1,000,000 in a handful of decades."</p>

<p>...or it could be worth $0. </p>

<p>The best advice: don't invest in anything that you do not understand. If you are interested in investing, start saving your money and educating yourself about the options. </p>

<p>Second: if you have an employer who offers a 401 K with matching funds, by all means, match to the fullest extent -- but you should also educate yourself about the investment options that those funds could be put into.</p>

<p>sanquine99--I don't think Apple pays dividends.</p>

<p>you are correct...my error</p>

<p>and you will not get all your federal/state withholding taxes back - You may look at a 529 College Savings Plan with you as the owner and beneficiary. There are a range of mutual funds but I'd keep the any investment short and liquid. Another 9/11 could cut your investment dramatically just when you need it most.</p>

<p>thank you for all your help! i didn't know that there were so many options :)</p>

<p>You know, most college kids can barely afford their Ramon. Who buys shares of stock in between Biology 101 and fraternity parties?</p>

<p>However, don't chicken out during another 9/11 and sell. Buy even more when the market looks miserable. (I puchased $2,000 worth of mutual funds when the stock market went down recently after the attacks in the Middle East.)</p>

<p>The stock market fluctuates - it is a bad place to put money that you may need in the short run.</p>

<p>Well, if you can allocate enough funds into a mutual fund or stocks (even just a few thousand), it is likely that when one gets out of college in 4-5 years, there will be some nice capital gains or at least dividend checks which surpass the petty interest banks currently offer for savings accounts. Barring any more economic disasters, the economy is currently on the rise up from the technology bubble burst and Sept. 11th Crisis. If a person is concerned with losing money in the short run, simple wait out on selling until a profit is realized. Investing in mutual funds or blue chip stocks also reduce one's chance of losing money long term.</p>

<p>Simply put: Don't go in with the mentallity that you will play the stock market through short-term investing and walk out a winner. Setting money that you don't need immediately aside to invest, however, is not a bad idea.</p>

<p>Best investment: When gas goes down to, say, $3, buy a thousand gallons and bury them under your porch. When the world ends, at least you'll have wheels. And friends.</p>