The best investments for college students (and young adults) might be the ones you’ve never heard of…
Recently I was asked to write for a large financial website as a guest contributor. Now, I’m just going to keep it real. I have pretty much zero finance knowledge beyond the basic basics.
However, after writing for them, I started thinking about the importance of finance.
Especially when you’re trying to live your best life.
While I’m not a genius investor I do personally have investments and I’ve looked into the world of finance enough that I feel like I can write some basic pieces for you guys.
So, without further ado, here are 4 investment opportunities for college students (or young adults).
1. Invest In Yourself
Okay, so this one is sort of cliché, however if you’re in college there’s a good chance statistically speaking that you’re taking out student loans.
If this is the case, consider your education an investment into your future. In other words, don’t think about investing until your loans are paid off.
Trust me, I took out $28,000 in federal student loans and if I had stayed on track to pay them off, I would have paid back $500,000. Yes kids…. $500,000.
So, while investing while in college might seem like a great idea, it could actually end up backfiring.
If you want to do something with the extra cash you have before you spend it, create a federal financial aid account online so you can login and pay off small amounts as you can.
But always abide by one of the core rules of investing: DON’T INVEST WHAT YOU DON’T HAVE.
If you’re in a position where you’re paying for college as you go, or you have a parent’s help, then keep reading to find out the best investments for your cash.
2. Peer-To-Peer Lending
One of my favorite options for college students is peer-to-peer lending platforms such as Prosper or Lending Club. I use both Prosper and Lending Club.
With Lending Club after 5 years my rate of return is 13.7%, but with Prosper it’s 22% Both platforms advertise the average return to be around 7%.
So I just think it depends on the loans you end up with. An average of 7% is a decent return either way.
If you’ve never heard of peer-to-peer lending, essentially people request a loan for whatever they need a loan for, and you invest a small chunk into their loan. Then, instead of a bank making money on interest, you’ll make that money.
If you’re wondering what makes peer-to-peer lending a good alternative to traditional stocks, the key reason (in my opinion) is that anyone can lend money using a peer-to-peer platform.
Whichever platform you decide to go with will screen the applicants, and then you simply decide how much risk you’re willing to take on based on a score that’s given (A-F).
Stocks, on the other hand, take a lot of time to learn and are fairly risky. When you can get 7% interest with little effort and minimal risk, it makes sense to do. Especially since you can start with only $25.
3. Real Estate
Now obviously if you’re in college you’re probably not in a financial position to run out and buy houses, to rent. Frankly renting houses can be a nightmare (I have a friend who does this full time). However, there are ways you can invest in real estate without buying property. Similarly to peer-to-peer lending, there are now platforms that allow for crowd funded real estate. One of the most popular is a company called Fundrise. This platform (and many others) allow investors an opportunity to purchase small pieces of a commercial real estate project.
Unlike peer-to-peer lending, the minimum investment with Fundrise is around $1,000. However, the average rate of return is supposedly a lot higher (somewhere around 10%). Most of these crowd funding websites haven’t been around for too horribly long, so there’s risk just in the newness. But the potential is definitely there!
I’m fairly new to crowd funding real estate, but so far it’s done well for me.
4. The Stock Market
Let’s just be honest, the stock market is scary. There’s so much to learn and understand that a lot of people choose to stay out of the stock market all together. But, just like all things, there are options for investing even for those of us who don’t care to spend every second of our day watching the stock market.
One of the easiest ways to invest is to choose EFTs (Electronic Funds Transfers). While I’ve personally never used Betterment or Wealthfront, I know people who have and but I’ve heard great things about them. These types of platforms make it easy to invest in stocks by asking you a series of questions and then automatically investing your money for you.
Update: As of writing this, I have created an account with Betterment. I went with them over Wealthfront because they do have a premium version that allows you to speak to a human. Eventually I figured I might need that. However, if you’re looking between the two, there aren’t many differences and Wealthfront does have a better app so it’s a matter of personal preference.
Hopefully if you’re in a place where you’re considering investing this post gave you some insight into some useful alternatives to traditional stocks and a way to use traditional stocks without needing to be an expert!