When looking at investments there are a couple factors that I would say define how you should manage your decisions. All investing, to some degree, is just allocating or moving capital into different forms for future supposed benefit.
You should consider liquidity, risk appetite, and time horizon as your main considerations when deciding.
liquidity: this is relevant just to understand how much cash you would want to have in hand or readily available at a moment's notice. This could be in case of emergencies or unexpected expenses, or purchasing opportunities for the near future. Define how much cash these situations would require and proportion your savings/spending appropriately to live by that standard.
Risk Appetite: This I would say is the biggest factor given the types of investments you could make will have different expected returns. More high risk assets could prove higher gains but higher potential of loss as well. Other assets provide more security in unstable times and it can be beneficial to have a mix of assets to guard against influxes of changing economics, events, disasters, etc. that will be out of your control. Arriving at this point can be difficult but entire jobs are dedicated towards this consistent return rate hedging against the unexpected. For stocks specifically there can be some high risk options with choosing specific hot companies but again, it can lead to a higher chance of losses if not chosen with qualified reasoning. I would suggest to really be curious about the different ways of investing in stocks, where other products exist such as ETFs that capture a category of companies usually. Beyond stocks there could be interesting forms of investments related to real estate, angel investing, or even art collection that can have similar results.
Time horizon: this relates some to liquidity but more so defines what length of time you would want to achieve a return in. This could be in 5 years or 10 or until retirement even. That generally means that you assume this money will stay with its dedicated asset, not to be seen until that expected date of sale/capture of gains.
Hopefully these comments can help you understand the process better, but always research as much as you can and strive for a point of mastering your personal finances even if not immediately applicable now, it will be a lifelong journey regardless.
I think you should try it with a little bit of money $100 to start, and use robinhood and play around with it. There's a lot of forums on how to buy decent stocks and how to avoid common pitfalls. $100 might be a lot of money but it's better than thousands or billions and you learn a LOT from self education.
I do believe investing in stocks is a good idea. If you have companies that you believe in and are showing promising results for the future it is worth putting in some money into them in my opinion. I also suggest investing in index funds that have a slow but steady growth. It is a lot better than just leaving your money in an account with a very little interest late being added on.
Equities — more commonly known as stocks — can diversify a portfolio and help build value over time.
The chart below shows that large domestic stocks have provided an average annualized return of 10.6% over the past five decades, which is higher than the returns seen on bonds or cash alternatives over the same period.
But remember: Stocks with higher potential returns generally come with higher risk. The value of your shares will tend to ﬂuctuate, and you may lose principal.
Learning how to invest is always a great skill, and the sooner you can start the better. However, I would start small while you are still in college and make sure you are only investing the amount of money you can afford to lose, as you are still learning. The sooner you begin to understand how investing works however, the better, as you’ll begin to get more comfortable with investing as you graduate college and start your first job. If you don’t have a lot of spare income to invest right now, that’s fine too. It’s still helpful to learn from your professors and read books about how to invest to best prepare yourself for when you do have some spare money to invest.
Anthony Kofi Hene-Amoah
stocks is laudable if you are able to note the following :-
1. Identify the type of business you
have INTEREST and
2. Consider your vision and goals.
3. Your general EXPERIENCE and
ABILITY to perform your
Best wishes to you.