People seem to have a common understanding when it comes to investing: the sooner you begin investing, the more you’ll be earning. Fortunately, this concept is true, and so we’re generally on the right track. The problem with this statement is that it creates an environment of pressure for the younger generation to start investing as soon as they can. Oftentimes, because these individuals lack the knowledge of how to invest properly, they lose out on their investment in the future. In some cases, they grow more reluctant to invest. They’ll just sit and wait year after year and end up not investing at all.
In this article, we will show you some of the most simple investments you can make at a young age. This will be perfect for students because these investment items are relatively inexpensive and feature low risk. Before we proceed, make sure that you already have a checking account with a bank. This is because most of the investment strategies we will recommend here revolve around the use of a bank account. If you don’t have a checking bank account, check out our recommendations for banks that give you a checking account bonus when you open an account with them. Without further ado, let’s head to our list.
Savings Account
A bank savings account is not often perceived as an investment. But in reality, they technically are. A savings account will pay you a small percentage of the money that you have with the bank as interest. This approach to investing is the safest one on this list, with the lowest risk attached. Because of this, this item also offers the least amount of returns. This trend will continue moving forward.
Low risk, low return. High risk, high return. It is recommended that you open a savings account no matter what. It does not matter if you have a greater risk appetite or if you have more money to work with. A savings account keeps your principal (the money you originally invested) safe against fluctuations in market prices, unlike the other investment items on this list. However, a savings account won’t protect your money against inflation. You can even lose money by keeping too much in your savings account, as the rate of inflation can go far and beyond the rate of returns you have with the bank.
Stocks
One of the most common terms in the investment world is stocks. Essentially, stocks are portions of the company which the company directors offer for the public to buy. Stocks technically represent ownership of the company, and so if you buy stocks, you technically own that much percentage of the company. Different stocks are assigned different values. This value will depend on the company’s performance. If the company does well, the stock value will increase, and you’ll have a gain on your investment.
Some companies also offer dividends on the stocks that they offer to the public. Dividends are repayments to the stockholders, which are taken from the company’s excess profits or allocated profits. Investing in stock would most likely require you to work with a professional, often referred to as a stockbroker. Stockbrokers facilitate the acquisition of stock, and they take care of the technicalities surrounding this type of investment. It is still up to you whether you want to hold off or sell your stock investment.
Stocks offer great returns, but they also feature quite a considerable amount of risk. Stock prices fluctuate so much in any given period, and this volatility does not make for a stable investment. Risk is the name of the game when it comes to stocks.
Index Fund
An index fund works a little bit similar to stock investing. Basically, companies and organizations buy off the stocks of companies (usually those listed on the stock exchange) and offer them as index funds. When you invest in an index fund, you are technically an investor of multiple different stocks. Some index funds have a handful of companies in their fund portfolio, while others feature hundreds in some cases.
Index funds are great because they are a relatively safe investment platform, which is perfect for starters. Unlike stocks that depend entirely on the company’s performance, you typically get the average market return when investing in an index fund. Thus, you can be a little bit certain to have the same returns as much as other investors will have.
