Rolling in the green

While investing and social networking could be considered two different worlds, they may be more closely connected with Facebook’s $5 billion initial public offering in May.

Facebook’s IPO, an action that a company uses to become publicly traded in the market, does look like a valuable investment, especially with its billion-dollar purchase of Instagram.

Although this company might seem valuable, students can still invest in a number of different companies, such as Starbucks, Exxon-Mobil or Apple Inc.

 

Young Money

 

The “Oracle of Omaha,” Warren Buffet, took advantage of these options when he began investing at age 11. Buffet along with other experts agree that people should try to enter the stock market as early as possible.

Freshman Luan Phan, an accounting major, started investing last spring. Since then, he has earned more than 5 percent on his principal. He invests in index funds, which he believes are safe compared to investing in individual stocks.

Although Phan is not an expert at investing, he educates himself on various topics related to the field. As a full-time student, he only has time to check his investments every six months, something that Buffet always advises to anyone who is willing to invest for a long period of time.

Phan describes investing as a necessity for his future.

“I don’t consider index funds a bad investment because they do perform poorly some days but they are almost always going up, so I am not really worried about it,” he said.

He added that investing is a great tool to have one’s money grow over time rather than saving it in a bank account where exponential growth is very minimal.

Investing can have benefits aside from earning money.

Dr. Ernest Liang, associate professor in finance, said college students should pay attention to the stock market to learning how it works, and to build a habit of researching several companies to assure reliable investments.

 

Small Change

 

Many students lack the knowledge and money required to invest, but may not realize that they can purchase stocks for as little as $5.

Freshman Mark Cogley said he was surprised that he could buy stocks for so cheap.

“You always hear about the expensive stocks on the news,” he said.

Students can purchase a Bank of America share for $8.64. If that still seems a little too pricey, an Imperial Sugar Company share is around $4.18, slightly more than the cost of a McDonald’s Snack Wrap with a fountain drink.

Then there are a class of stocks called “penny stocks.” Stocks that are as low as one cent.

These “penny stocks” are shares of companies that have little or no real assets and no track record of earnings.

“Penny stocks” are considered to be very risky since they are often used in “pump and dump” schemes.

This is where phony financial planners lure investors by claiming that a certain penny stock will be going up.

Uneducated investors fall for this trap and buy the stocks, increasing the value of the stock while the planner sells his shares for his own profit.

 

Prime Stock

 

Although investing in index funds is an option one may consider, there are many forms of investments, one of which is individual stocks, portions of company shares used to raise more funds to expand the company’s financial capability.

Another type of investment, mutual funds, consist of money managers who monitor the performance of the purchased securities, invest the funds and attempt to produce capital gain along with income for other investors.

Bonds, another common tool of investment, are a debt instrument issued by a government or company, which accumulates a fixed interest rate on the principal amount for a certain period of time.

Some investments, such as stocks, require at least some extensive research to find profitable investments, but others like mutual funds, require very little research.
Liang said that buying anything requires prior knowledge.

“The education that comes from investing in the financial markets as well as the whole idea of researching and educating yourself are principles that can be applied in several different disciplines,” said senior Trenton Bell, who is majoring in business management.

Bell added that he would eventually invest in stocks and mutual funds to diversify his portfolio.

Sometimes it is hard for students to consider investing after the 2008 financial crisis, but many must know that the market experiences highs and lows.

 

Old Money

 

Investing can be very beneficial in the future. Many students who invest agree that it will be important in the future since several retirement plans are impacted by the economy and investing.

Phan said that most people do not realize that a 401K investment tool.

“Investing is something one should know how to do because even if someone has no idea what the stock market is about, the market effects his or her retirement plan.”