Tips on Investing Despite Looming Student Loan Debt
If you’ve just graduated college, most likely you have years of student loan debt to pay off. College expenses have risen faster than the rate of inflation and students are having to take out more loans to help pay for it. So, the question is, should you put off investing and focus on paying your debt for fear of a volatile market or risk it and potentially earn a big payoff if the market swings upward?
Well, it depends on your unique situation. Of course, if you’re struggling to pay your bills, then any money you earn should be directed toward all your debt. However, if you’ve developed a little bit of discretionary income and can afford your monthly loan payments, then why not send some money to an investment account? If you’re considering this option, here are a few tips that should help get you started in the investment game:
Buy Individual Stocks
Starting small in the stock market is obviously a great tactic as you begin to learn the ins and outs of investing. The most important thing to remember: there is money to be made in the stock market. For instance, if you were to purchase a few shares of Apple stock in 2004 which was valued at $16.25 and left it there, you’d be able to sell that at $614.13 ten years later. Likewise, Google’s stock in 2004 was $85 in ’04 and in 2014 was $500.
Newer tech stocks (social media, apps, etc) could have just as positive a future so if you can afford to purchase a few shares they might be worth a lot more years later. But of course, that’s all speculation and you should always do your own research when investing. Just practice your due diligence before investing any money regardless of industry and find a few stocks you believe will do well and watch the magic (knock on wood) happen.
Setup a Demo Investment Account
If you don’t want to risk any money whatsoever, it’s fairly easy to setup a demo account to see how you’d do in the stock market. You’ll be offered some fake money that can be used to hone your skills as an investor. These accounts are completely free and will help you gain necessary experience without losing any money.
You’ll also learn how to use the trading platform of a specific brokerage firm. A few firms offering this feature include Scottrade, Updown.com and OptionHouse. To take it a step further, if your fictitious account earns a nice return, you can frolic on a bed of monopoly money to enhance the illusion of the new cutting-edge investor you’ve become.
Learn to Save
When you’re committed to investing, one important discipline should be discussed. Saving. The money being put away in an investment account can’t be used for a night out at the movies or the latest game console. In order to have enough money to invest, you might need to find ways you can cut expenses. That means evaluating all your debts, including your student loan, and monthly expenses to find out what can be cut and by how much.
In some cases, you can even decrease the amount of interest owed on your student loan if you set-up automatic payments to be deducted from a bank account or have made timely monthly payments for a certain period. Many student loan lenders, in an effort to prevent students from consolidating their loans, will offer interest rate reductions to help keep their borrowers. Also, investing in the stock market should come after a solid 401k plan and a modest 3-month emergency fund.
Keep it Simple
Taking it slow and learning as you go will help you become a wise investor in no time. Besides, as with many things life, taking risks can result in huge rewards.
Lance enjoys writing about financial topics as well as posting tips on his blog EasyScholarshipsNow.com.