I Started Investing in College. Here Are 5 Key Tips for Other Students

I started researching investing at age 15 and started building an investment portfolio the year I entered college. During my college years, I learned how to manage my investments without compromising my education. Based on this experience, I offer five tips to help student investors make the most of their college years and their investments.

1. Ask yourself why you want to become an investor

Before delving into how to invest, it’s important to think about why you want to invest. Contrary to what popular culture might have us believe, achieving long-term investment success requires patience, hard work, time, and psychological discipline. You are only in college for a few short years, and it takes serious effort to do well academically. Ask yourself whether spending your limited time and energy investing is the right decision for you. Compare this with other major commitments you could pursue, such as completing a second major, learning a foreign language, working with a professor, completing an internship, or participating in athletic and community groups. Although it is possible to do many of these things in addition to your investing and college studies, there are limits to the commitments you can realistically maintain.

Different investors have different motivations. I know an investor whose goal is to fund the education of 1,000 children. Others are motivated by simpler goals such as the desire to build financial wealth for themselves and their families. My long-term goal is to establish a charitable fund to support vital services in my city of Vancouver. No matter your goals, having a strong sense of why you want to be an investor will contribute to your resilience and long-term success.

During times of financial crises, it is tempting to sell your investments at unusually low prices to avoid further losses. Likewise, in times of persistently high yields, it may be difficult to resist buying overpriced securities whose prices continue to rise. Seriously consider why Your desire to invest will encourage you to remain diligently committed to your investment strategy through good and bad times.

2. 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 to buy high and sell low, which is a recipe for financial disaster. This temptation is often exacerbated by social pressures. As investors, it is inevitable that we experience self-doubt and fear of missing out on other investors’ returns. However, this tendency must be resisted to avoid the temptation to look for short-term gains.

College can be a particularly difficult environment in this regard. During the orientation day my college organized for new students, the student union president gave a speech urging students to approach their college years with a healthy dose of fear of missing out. Even then, it occurred to me that this was terrible advice for investors.

One of the best ways to prevent yourself from making bad investment decisions is to educate yourself about investor psychology. Two of my favorite books on the subject are Animal Spirits by Nobel Prize-winning economists George A. Akerlof and Robert J. Shiller, and Jason Zweig’s book “Your Money and Your Brain.” Studying these books will help you enhance your understanding of the profound role that psychology plays in your decision-making process and in the financial markets as a whole. Understanding the psychology of investing will help you avoid irrational investment decisions.

3. Adopt a realistic strategy given your schedule

Conducting a comprehensive investment analysis requires a great deal of focus and time. As a student, you are unlikely to have time to delve into your research. It makes sense, then, to adopt a strategy that you can realistically implement in your limited free time.

Perhaps the simplest strategy consists of investing regularly in a portfolio of diversified investment funds such as index funds, exchange-traded funds (ETFs), or mutual funds. This approach may be useful for investors who are less interested in conducting in-depth analysis of individual investments and who prefer to delegate the more tedious aspects of investing to a third party. On the other hand, investors who want to manage their money effectively will have to pay for the service in the form of higher management fees.

Full-time students who want to manage their investment portfolios will need a time-efficient investment strategy. I have chosen to build my portfolio primarily based on companies that are priced below liquidation value. I chose this strategy because it is more amenable to quantitative analysis and monitoring. For example, I created a standard investment checklist to screen investment candidates. The checklist outlined the exact prices at which I would buy and sell the company’s shares. I then set automatic alerts using services like IFTTT to notify me when stocks reach specific price thresholds. Through this strategy, I was able to gain real investment experience without compromising my education.

For students who want to try hands-on investing but don’t have the money, a third option is to invest using online simulation software such as Stock Simulator from Investopedia. Simulators are a great way for investors to test new ideas without risking exposing real capital.

4. Invest in your knowledge

If you lack the time or resources to invest during your college years, it is worth noting that the best investment you can make is developing your own knowledge. This principle applies equally to students who have the time and resources to invest.

Depending on your choice of major, you may find that your college education directly contributes to your investment education. Others may need innovative ways to create overlap between their investor education and their college curricula. The major I chose—History Honors, with an emphasis in History of Science—has no direct relation to investing. However, I have found that many of the skills I have developed, such as primary research, writing, and critical thinking, have clear applications in investment research and analysis.

Regardless of your chosen field of study, if you approach your investment education in a proactive manner, many professionals in the field will be open to answer your questions and support you in your development as an investor. I highly encourage all student investors to attend networking events and network with industry professionals.

Another way to build your investing knowledge is to learn from the greatest investors in the world. I have chosen to base my knowledge on the value investing methodology developed by Warren Buffett’s mentor, Benjamin Graham. I recommend the book “The Intelligent Investor” by Benjamin Graham. Another classic is Security Analysis, which Graham co-wrote with David Dodd in 1934. To learn how value investing has evolved since Graham’s time, I highly recommend studying the letters written by Warren Buffett to shareholders in his holding company. , Berkshire Hathaway (BRK-A, BRK-B). The letters explain how Buffett implemented and expanded Graham’s principles of value investing. These letters are especially helpful because Buffett acknowledges and reflects on his mistakes. Taken together, Buffett’s letters to shareholders and classic texts by Graham and Dodd provide a comprehensive introduction to the theoretical foundations and practical applications of value investing.

5. Keep good company

One of the greatest benefits of being a student is the opportunity to connect with a diverse group of people on campus. In my experience, a network of peers with whom to discuss investing has been instrumental in developing more accurate investment decision-making. The key is to find individuals who are interested in discussing investing and willing to engage in constructive discussion.

Of course, this is easier said than done. I had to be open about my passion for investing to build this network. It took me until my third year of college to overcome my inhibitions and start an investing website where I share my thoughts on investing. I was amazed to find that so many people who I never assumed would be interested in investing reached out to me with questions and comments about my work. For the first time, I started building a network of peers to discuss investment ideas with.

The long-term value of such communities cannot be overstated. At the same time, it is important to keep in mind that people tend to emphasize their investment successes while hiding or downplaying their mistakes. Therefore, it is wise to approach investment discussions with a healthy degree of skepticism.

Bottom line

Learning to invest during college is challenging. Students who approach this challenge with a clear sense of purpose, a realistic investment strategy, and a commitment to learning can best use their college years to lay a strong foundation for their investing future. Who knows? One day, students may study your investment philosophy.