If you have been keeping up with the news lately, you’d know that Reddit users caused an upset in the stock market recently by driving up the price of Gamestop stock. As the dust settles, it has become clear that retail investors, meaning everyday Americans as opposed to Wall Street investment companies, may not have made the huge impact that was projected in the news. Either way, the event has sparked many people’s interest in investing, and I began wondering how I can use the money I save during college to start investing.
An important point is that investing is supposed to be a long-term, low-to-moderate-risk way of compounding money. The stock market trading that usually makes the news is called speculation, and it is characterized by short-term, high-risk, and high-reward investment. Wherein people buy stocks and sell them as soon as the price rises to make a quick profit.
If you are a college student with limited savings, and you want a way to invest some money and let it compound on its own, these services are a great place to get started.
Acorns came up most frequently in my research. It offers a hands-off approach, with low investments, since it rounds up your change from your debit card or PayPal purchases and invests it in exchange-traded funds (ETFs). These are diversified packages of different stocks and mutual funds. Acorns is great for students who want to invest pocket change, but expect small profits accordingly.
The starting fee is $1 per month, with $2 and $3 options, but since returns are usually low, this fee may be too high compared to gains.
Stash has a reputation for being good for beginners who want to learn since it offers educational guides. Like Acorns, it allows for investments in ETFs but categorizes these bundles by category, such as “Women Who Lead,” or “Water the World.”
Users also have the option to buy fractional shares of big-name stocks such as Amazon (when you may not be able to afford a full share). Stash advocates against day trading and encourages long-term, stable investments.
Stash has higher fees, with plans at $1, $3, and $9.
Betterment is a Robo-advisor, meaning it offers financial planning based on algorithms. It provides more guidance than Acorns, Stash or Robinhood, and suggests funds and stocks to invest in based on your savings goals. More ambitious goals may result in higher-risk and higher-return suggestions, while more moderate saving targets will result is low-risk, long-term investing. Like Stash, Betterment suggests similar funds based on criteria such as social responsibility.
The fee for Betterment is 0.25% annually since it is a Robo-advisor.
The main takeaways from my research are that you should start to invest as soon as possible, even if with small amounts, in order to build up your savings in the long-run, and that young investors should stay away from speculation and day-trading and instead focus on more modest but more reliable returns over time. There are thousands of online resources to research, so take this as a starting point and take control of your money today.