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5 Interesting Facts I Bet You Never Knew About Investing While In College
Investing might seem intimidating right now, but that’s a good thing. When you think you know everything, you make mistakes. It’s imperative that you know that investing can go wrong, and when investing goes wrong, you can lose a lot of money. The purpose of this statement isn’t to scare you away from investing. It’s to make sure you keep investing simple and stay away from the dangers. Many people get greedy, which leads to financial misery. This article will show you how to not be one of those people. Like anything else, when you keep it simple, you’re more likely to do well.
Below are 5 Interesting Facts I Bet You Didn’t Know About Investing While In College. Even if you know one of these facts, let them act as a refresher.
1. The Stock Market Isn’t Your Only Option
If you’re risk-averse but you still want to invest, one option is a CD, which stands for Certificate of Deposit. This means you’re being rewarded for keeping your money with a bank. You might only earn 1.30% per year, but think of it as a savings account that is super safe and gives you a little kickback.
2. Investing Platforms Can Be Free
The first thing you should notice is that the phrase ‘trading platforms’ will never be used in these articles. Once you take the trading route, you’re doomed. Some people might say they just earned a certain amount of money via trading, but they will eventually lose. The only way to win in that arena is to get on the inside with a trading house. This is possible, but it’s a high-pressure lifestyle and not something that often leads to genuine happiness. For that reason, ‘investing platforms’ will always be used. Investing means buying a position and holding it for at least one year.
If you want to use a free investing platform, look at the Robinhood app. You can invest in stocks, ETFs, and options, but it’s recommended that you stay away from options. If you want access to research, you can use Robinhood Gold, which costs $5 per month. If you’re willing to pay for your investments in exchange for excellent research tools and customer service, then you should consider Charles Schwab.
3. Following The Market Is A Terrible Idea
You might think this is subjective, but it’s not. When investors pay attention to the stock market, they tend to make emotional decisions. When people make emotional decisions, they usually make bad decisions. Panic selling is enemy #1. Not only will you be taking your money out of a long-term winning company, but you will have to pay short-term capital gains if you sold for a profit in less than one year, and now you’re likely to put that money into a higher-risk company because you want to regain some of the profits you just lost. This is called chasing.
If you’re invested in a winning company with top-tier upper management, everything should eventually come back. You will pay less in taxes because you held the position for more than a year and you will still receive dividend payments (if applicable). It’s much easier to stay on this path if you ignore the market.
4. Robots Are Real
If you don’t want to make investing decisions because you don’t know what you’re doing, then you can go with a robo-advisor, such as Wealthfront or Betterment. You only need $20 to get started. These robo-advisors will invest for you based on your goals. They will charge 0.25% of whatever you have in your account annually. That’s a fair price for set-it-and-forget it.
5. You Can Open An IRA
IRA stands for Individual Retirement Account. If you’re working a part-time job while in college, you can open an IRA. This will be a good head start for you. With an IRA, you can defer taxes on gains and dividend payments, and you can deduct contributions from your taxable income. You can do these things because the government wants you to invest.
Now you know a lot more about investing in college than you did a few minutes ago. Use this knowledge to your advantage. As long as you steer clear of ego and greed, you should do well.
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