Column: Broke? How to start investing as a college student.

The other day, I was at McDonald’s and my card declined. At McDonald’s. My card declined.

The one day their ice cream machine was working, my debit card wasn’t. 

Then, I checked my Fidelity account. I wasn’t really broke because my investments were making money. I know the stock market can be scary, but it’s so important to invest your money.

When it comes to buying stocks, you can’t just go to the New York Stock Exchange and purchase equity like you would an apple at the store. When investing in stocks, bonds and other funds, you need a middle man. This middle man on Wall Street is called a brokerage. Open one of these babies and you’re one step closer to stacking penny stocks like Jordan Belfort. 

Step One: Why are you investing?

You work hard for your money. We are in North Carolina where the minimum wage is... well, minimum. So, before throwing your money in whatever “sounds good,” do some research. 

What are your goals when investing? Are you in it for the long run? Looking for a safe mutual fund that will guarantee a pay off in 20 to 30 years? Or are you looking for a side hustle? Do you want to actively alter and tweak your portfolio every day?  

Thinking long term? Looking for an easy million dollars by retirement? Go for an Individual Retirement Fund. Hypothetically, if you contributed around $5k annually — or five-to-ten percent of your salary — you could have over $1.5 million waiting for you by the time you're 65. IRA’s are awesome because they allow you to contribute to the fund with tax-free growth. Moreover, some of your contributions may entitle you to tax deductions. Some IRA’s can boast a seven-to-ten percent return. You can open an IRA through a brokerage.

Want something more short term? Try a traditional brokerage account. There are two types of traditional brokerage accounts: a cash account and a margin account. For simplicity's sake, I am going to assume you’re new to investing, so I will urge you to use a cash account. This is where you invest only what you have. A margin account is where you can borrow from your brokerage — that can get risky quick, so proceed with caution if you go down that route. 

Step Two: Choosing a brokerage

You’re now entering the Bermuda Triangle for preliminary investors. This is where big words and bank logos flood your browser — where websites will ask you for your credit card information, but you don’t know exactly what you’re buying, so you close your browser and buy something on Amazon instead.

Stay with me. Instead of buying from Bezos, buy into Bezos by starting a brokerage account. Companies like Robinhood, Betterment or Fidelity are great places to get started. These companies are easy to use and have lots of resources for research and advising. 

But before choosing whatever pops up first in your Google search, read the fine print! Does the brokerage take a commission on trades? Do they charge fees on purchases of investments? What kind of services do they offer? These are important questions to have answered before you enter your credit card info.

I use Robinhood as my “hobby” account. It offers no fee and no minimum trading. I regularly put $10-15 and buy equity in companies that I see short term growth. Though I know people who primarily use Robinhood, I don’t think it’s great for long term investments. It doesn’t offer retirement accounts, mutual funds or futures trading. It’s marketed toward young people for a reason. 

If you want an account that offers everything, you may have to pay a bit more to join. These bigger companies allow you to plan for your retirement and customize your portfolio. For example, Fidelity has a high broker assisted trade fee. Still, it’s worth it. Companies like Fidelity have a treasure trove of research resources, commission free stock and options trading.

All said, do your research and pick an account that most closely matches what you want. 

Step Three: Applying for an account

If you are a student at UNC, you’ve already finished the hardest application of them all, including its supplemental essays. Compared to the Common App, applying for a brokerage account is light work.

Step Four: Start investing

Rich people are rich because their money works for them, not the other way around. Your money works when you invest in the right things. Do some research and invest in companies you believe in. In the meantime, a great first purchase is in an index fund or a certificate of deposit.

Happy investing!

@noelleharff

opinion@dailytarheel.com