18 - 2011

Investing 101 – Portfolios for the Young & Broke

The following is a guest post from LaTisha D Styles.

If you’re a college student then you probably are broke. I know because I’ve been a college student for about 8 years. Hence the term ‘broke college student’. Students have to watch every penny, and their bank checking account is often flirting with a zero balance. We really don’t have cash to throw around or invest. But there are 3 really simple ways to start building a personal financial portfolio even if you don’t have much money to start with; and if you want to be a successful investor you have to start somewhere.

Begin with a budget
Most people who like to spend, including me, hear the word budget and start running. But a budget doesn’t have to be restrictive. To be a successful investor, your budget can be as simple as saving 10% of every dollar you make. I recommend you donate 10% as well and live off of 80% of your income.

You will be surprised how fast your savings grow when you follow this one simple rule. Consistent saving is the secret to successful investing. Every time you put away that 10% you are bringing yourself one step closer to a large portfolio. A really good book that demonstrates this principle is The Richest Man in Babylon by George S. Clason. It’s a must read if you want your money to work for you.

Start with a demo account
Practicing or testing out your strategy with a demo account will give you confidence when you actually put that first dollar in. This will also help you test out the fees and features of the broker you want to do business with. A good demo account should also come with online or phone support from the broker.

Be cheap when you choose your broker. Avoid brokers with account maintenance or closing fees. Scottrade has a really good platform for beginners with lots of educational information and free webinars to clients. They also have a nice platform for their demo account if you use technical analysis to trade. The Motley Fool has a nice broker comparison tool you can use to compare fees and services.

Invest in what you know
Smart investors like Warren Buffett don’t diversify. They only invest in asset classes or industries that they are familiar with. If you really like fashion then you might want to research companies in the consumer discretionary sector. I like to invest in stocks in the technology sector because I enjoy reading about technology. Research is the key to focused investing.

You can start investing even if you are still a broke college student. Remember that ‘broke’ is temporary. Start saving 10% of your income, practice with a demo account and build your portfolio by investing in what you know.

LaTisha D Styles is a mild mannered writer teaching young adults 9 Tips for Successful Investing at Financial Success for Young Adults. You can find more from her at www.FSYAonline.com.

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