Life after college is full of new challenges and responsibilities, as evidenced by much of the content on this site! There are always new hurdles to clear, and transitioning from the life of a student to that of a “real grown-up” can be a much more involved process than many anticipate. Also, many of the burden tends to come with regard to finances.
Naturally, one of the primary concerns out of college is finding sustainable income, hopefully with a potential upward trajectory. We go to college largely in order to become attractive candidates for good jobs, after all, and this is the first priority for most college graduates (given that some have additional schooling, some opt to travel, and some have to address myriad other responsibilities and obligations for their own reasons).
But one aspect of life after college that many graduates don’t really think about until it’s upon them is how to manage income once it’s attained! In the early going, it may well be that there isn’t a lot of extra cash going around. Rent and the daily costs of living on your own can be quite burdensome, particularly with a starting salary. However, many will tell you that if there’s any extra cash whatsoever, it makes sense to go ahead and invest early on, so that you can not only start to grow your finances, but also to get a feel for how to invest and manage a portfolio.
And to do all that, you’ll need to figure out some strategies! So in this post I’m going to talk about four tips that can be helpful when making your first personal investments.
1. Diversify From The Start
Diversity is a very popular word in investing circles, and most successful investment portfolios focus fairly heavily on diversification. What exactly does this mean? Well, the basic idea is to keep your investments from relying on success in the same industry or sector. For example, don’t put money into three different tech and telecommunications companies.
On a list of beginner investor tips from financial expert Suze Orman, it’s also mentioned that diversification is perfectly possible for those who are starting out without a lot of money to spare. In such a situation, it’s recommended to consider buying a mutual fund, which is basically a prearranged portfolio designed and maintained by a professional. This is a common investment method for young people just starting out, and it facilitates diversification naturally.
2. Set Up Limits
I can’t stress this point enough! One of the most popular tips out there for all investors”not just beginners!”is to leave emotion at the door. Never invest in a company just because you like its product or you hope it’s going to do well. But by extension, you should also put limits in place to keep your emotion from getting the better of you when assessing gains or losses.
As is mentioned in a list of top traits of successful investors, “human psychology suggests that people hang on to losses longer than they should.” Similarly, people tend to cash out and run with gains. When we’re down, we want to stay in long enough to turn things around, and when we’re up, we want to capitalize.
Those aren’t always the best decisions, however, and the best way to avoid them is often by setting limits. Before you actually invest, decide on a lower limit where you’ll cut your losses, or a high at which you’ll go ahead and cash out. Sticking to these restrictions will keep you disciplined and unemotional.
3. Know Your Risks
There’s no exact strategy here, but it’s generally important to understand if an investment is considered high- or low-risk”with the caveat that every investment is risky on some level or another. There are various methods people employ for finding low-risk investments, but the thing I’d recommend above all else is to stay current with your news.
There will always be new opinions and updated advice for which investments are the closest to being “low-risk,” and you should take advantage of them, simply because these things fluctuate. For example, five years ago gold and precious metals were considered good low-risk, long-term investments, and these days they’re much less stable than their reputation implies. Always stay up-to-date!
4. Consider Your Methods
Finally, I’d also encourage any young, first-time investor to consider various available methods. Generally speaking, investment requires association with a registered broker, who can conduct your transactions in the stock market. However, there are alternative ways to invest your money. I already touched briefly on the idea of buying into a mutual fund, and another brand new idea that’s been growing on me is Robin Hood.
It’s an innovative service that lets you invest in a more straightforward, easily managed fashion. There are no fees (which in and of itself is appealing), and you can invest small amounts on the spot, which is appealing for a lot of young people. It’s not for everyone, but it’s a good example of why understanding available methods can be beneficial.
I’d also add that you shouldn’t be freaked out if you mess up! Investment is tricky, and as long as you’re careful with your money, you’ll be able to learn from your mistakes in the early going. With these tips in hand, you should be poised to give it a shot”and hopefully succeed!
Article contributed by Sara Upton
Sara Upton is a recent college graduate and blogger. She lives in Knoxville, TN, with her boyfriend, Ben, and their dog, Ned.