How to Start Investing in the Stock Market as a College Student?

The earlier you invest, the more money you can make from the investments. Because of this, college is a great time to start investing. College can be an excellent time to begin exploring investment opportunities. Stocks, bonds, and mutual funds are three common ways to invest money. But how do you know when is the right time to start investing? And even if it is the right time, how can you afford to invest in stocks as a college student with the high costs of tuition, textbooks, and more? In this post, we will look at how to start investing in the stock market as a college student in detail.

Why college is a good time to start investing?

For most college students, investing is probably not something that regularly crosses their minds. And yet, now is the best time to start learning. Thanks to the online apps that we currently have available; young college students like us can start investing in the stock market with very little money. Learning about it now while we are still young will put us ahead of most other people who simply choose to ignore it and the potential wealth it brings.

Investing does not require to us have a ton of money upfront. Many brokerages do not require a minimum investment amount. In fact, you can invest with as little as $5. Investing minimal amounts at the beginning of your college career could leave you graduating with a small amount of money.

Leverage the Power of Compounding

For this example, let’s consider what would happen if a college student invested $1,000 in an ETF that had an average annual return of 8% at the beginning of her first year at college. For reference, the average annual return of the S&P 500 since its inception is about 10%.

  • 1st Year: $1,000 X 1.08 = $1,080
  • 2nd Year: $1,080 X 1.08 = $1,166
  • 3rd Year: $1,166 X 1.08 = $1,259
  • 4th Year: $1,259 X 1.08 = $1,360

As you can see, investing $1,000 at the beginning of your first year of college can result in a 36% gain or a $360 gain by the end of college. If the investor decides to keep her $1,000 in the stock market for another 5 years and it continues to experience an annualized return of 8% she will double her original investment.

How to find money to save or invest?

If you are spending all your income, and never have money to save or invest, you’ll need to look for ways to cut back on your expenses. When you watch where you spend your money, you will be surprised how small everyday expenses you can do without adding up to over a year.

Additionally, part-time jobs, internships, assistantships, etc. can also provide you a handsome amount of money.

What are the investment options for college students?

There are around a lot of terms — stocks, bonds, mutual funds, etc. Some of the common investments are listed below.

  • Savings account: A savings account is the most basic financial investment, which allows you to store money securely while earning interest. The annual percentage yield, or the real rate of return earned on an investment, reaches 0.50% on some accounts. This type of account is federally insured for up to $250,000, so you won’t lose your money if the bank fails. You would typically do this at a bank. Choosing a different bank might make sense for you because it will make you more money.
  • Certificates of deposit (CDs): This type of account is similar to a savings account but with a fixed time period and a higher fixed interest rate.
  • Stocks: When you buy a stock, you are essentially purchasing one piece of one company. The shareholder is entitled to own portions of the corporation’s assets and profits depending on how much of the stock they own.
  • Mutual funds: Mutual funds bring together investments from many people and invest that money in stocks, bonds, and other assets. The specific stocks, bonds, and assets the money is invested in are known as the “portfolio”.
  • Exchange Traded Funds: ETFs are similar to mutual funds in that they are a collection of assets, but they are designed to track a particular index, sector, commodity, or other assets. So, you might have an ETF that tracks corporate bonds or real estate. As a college student, you should invest in low-cost well-diversified ETFs as it allows them to have access to hundreds of stocks, without having to personally research each one of them.
  • Index Funds: An index fund is also a collection of assets, but they are pegged to a specific index such as the S&P 500 or Nasdaq. One of the perks of index funds is that they tend to be lower in cost because they don’t have an expert taking the time to pick stocks or bonds for funds.
  • Bonds: In the simplest terms, a bond is a loan from an investor to a borrower such as a certain company. Bonds are a key ingredient to having a balanced portfolio as they can help soften the blow if the stock markets plummet.

Tips for Investing as a College Student

Know Your Purpose

Before you dive in, consider why you want to invest. Having a reason to underpin your efforts makes it easier to stick with your plan long-term, especially during economic or personal financial instability.

Set Your Investment Goals

Once you’ve determined your purpose, it’s time to set some short-term, mid-term, and long-term goals. Think about where you hope to be in a few years or decades – and then make decisions to get you there.

For instance, if you want to buy a house in 10 years, you’ll probably want to balance growing your wealth and hedging against a market downturn. But if you want to retire in 40 years, you may be able to afford more risk now.

Decide How Much You Can Afford

Generally, you should stock up your emergency fund with at least three to six months’ worth of expenses before you start investing. You’ll also have to consider how your portfolio contributions fit in alongside expenses like rent, groceries, and debt payments.

At the end of the day, you shouldn’t invest what you don’t have.

Adopt a Realistic Strategy

In college, a realistic investment strategy is one you can implement in your free time, between classes and studying. It also shouldn’t involve more risk or capital than you can afford.

Generally, this involves investing in low-cost, well-diversified index funds and exchange-traded funds (ETFs). These passive investments expose you to a wide variety of investments with just a little bit of capital.

Be Disciplined and Invest Regularly

One of the best ways to build wealth is to invest regularly instead of trying to time the market. By investing a portion of your income each month—even just $5 a week—you’ll get to take advantage of strategies like dollar-cost averaging. Plus, you’ll start building healthy financial habits that will last well beyond your college years.

Beware of Investor Psychology

As investors, our mental habits can be our greatest ally or our greatest enemy. As mentioned above, many investors fall victim to the temptation of buying high and selling low—a recipe for financial disaster.

College can be a particularly challenging environment in this regard. Don’t be a victim of FOMO—fear of missing out. One of the best ways to prevent yourself from making poor investment decisions is by educating yourself about the nature of investor psychology. 

Best Investment Apps for College Students

  • Robinhood
  • Webull
  • Acorns
  • M1 Finance
  • Stash
  • Vanguard
  • Fidelity
  • Streitwise
  • Charles Schwab

How to Start Investing in College?

When starting your college career, you’re likely more focused on your course load, making friends, and getting adjusted to a new environment than investing.

However, it’s important not to neglect your financial future and start investing in college (even including building credit as a college student) so that you have an even stronger footing when starting the rest of your life.

Investing doesn’t need to be complicated or scary – here are some tips on how you can best get started as a student:

  • Start with small amounts of money: Building up your investments with small amounts of money is a smart idea when you’re starting out. You can then build it up over time and turn investing into an automatic habit
  • Pick a simple investing platform: There are lots of different platforms to choose from, but what’s important is that the one you pick should be simple enough for you – and have all the features you need to make investing an easy process.
  • Have the platform grow with you: You can set up automatic investments, choose how much risk you’re comfortable taking on (and what percentage of your budget to put towards it), and even see where all of your money is invested – so that managing everything as a student becomes easier with time

Can international students invest in the US stock market?

Yes, an international student (on an F-1 visa) can invest in the US stock market. Not only in the stock market but in many other things like MF or ETF etc. To start investing, a student must open a brokerage account with a reputable brokerage company. The cool thing about opening a brokerage account in the US is that they pay you cash to open the account. Isn’t that an amazing thing? You start earning even before the actual investment begins. They don’t even require a service fee.

Some brokerages even provide a free checkbook at no charge. So what are you waiting for? Open a free brokerage account and start your investment journey. The only thing to keep in mind is that international students have to complete a few extra steps than US citizens, but mostly it’s for the better. For example, if you are not a US citizen, you will not have to pay capital gains tax.

Can a College Student Invest in Stocks?

Yes, college students can and should learn to invest in stocks. Investing is different than saving. You might put money in a savings account or simply let it accumulate in a checking account. You know precisely what your money will be worth when you use it. However, any growth is minimal. Saving is a wise move for college students, especially if they don’t have an emergency fund yet. Still, it isn’t the same as investing. When you invest your money, you’re making your investment work for you as it earns dividends, increases in value, or both. You don’t need a substantial amount of time or money to get started.

You can sign up with an online discount broker by providing little more than your identification information. Many online brokerages charge no fees for buying and selling stocks. These automate your investment portfolio by making contributions into suitable investments meant to align with your financial goals, timeline, and risk tolerance.

Suppose you prefer to have a more self-directed investing experience but still rely on automation to fuel you’re investing. In that case, you might consider an app like Ellis. This investing service allows you to design your custom portfolios with pre-made investment selections or your preferred stocks. The service also comes with a bank account and debit card if you sign up for their Ellis service.

How much can international students invest in US stocks?

There is no maximum or minimum amount students can invest in stocks. Some brokerage accounts have limits as to how much you can invest in a given day or week. Otherwise, the government does not restrict how much students invest in stocks.

How to get into stock trading on a college student budget?

If your goal is to invest money for a long-term reward, look for zero fees, and broad-based index funds. Since you’re well away from the income limits and put either some of those index funds or a few solid utility stocks.

 If your goal is to buy & sell stocks in the short-term, less than 1 year, you’re going to lose all your money, either to other investors, to fees, or to taxes (or all three). You are not as smart as the hundreds of thousands of professional investors that you are up against. Get over yourself; they will take all your money.

If your goal is to invest “excess” funds that you have from student loans, do not even think about it.

Where to open an account to invest?

Over the last decade, technology has made investing available to everyone for a low price – even free. Today, there are a lot of places where you can invest and buy stocks for free. There are also mobile apps that allow you to invest for free.


The most important point for college students who are looking to invest is also the most urgent – get started today. The sooner you begin learning about the market, the sooner you can begin planning your financial future.

Students can begin with modest amounts of money and hopefully grow both their knowledge and their portfolio.

Keep in mind that a measured approach makes sense when you’re just starting out. Going “all-in” on a stock or particular asset class is particularly risky and could expose you to considerable losses in the event of a decline.

Volatility comes along with most investments and learning how to deal with the emotions it creates is an important part of the learning process.

References: 1, 2, 3, 4, 5, 6, 7.

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