Teaching · Trading · Trading

Why Every College Student Needs a Brokerage Account and a Roth IRA

The key to building wealth is to start early and put your efforts into acquiring or creating assets that will continue to pay you throughout your life. By beginning to build investments in college, you are giving yourself a huge advantage later in life, and I’d be willing to bet you’ll look back on your early investments and think it was the one of the best choices you made in your college years. Simple, small actions now will lay the foundation for real wealth later on. Collect assets!

What is an Asset?

“An asset is any resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.” -from Investopedia.

You don’t have to already be wealthy to own assets. You can start now. Common assets that everyday individuals own include property, stocks, and sellable products. With some exception, property investment isn’t easily accessible for college students so you have to look elsewhere. Assets can be bought or created. Think about a YouTube account that is monetized. Each video uploaded to that account has the potential to earn future income from ad revenue or referrals depending on how it’s set up. Each created video is an asset that generates income. Creating assets that produce real income is time consuming and requires a lot of work. But, if you do have the time and skills to create a money-generating asset, there is no reason not to start doing it now. If you do not have the time or have not discovered which skills you possess to create assets, then it’s time to start purchasing assets.

How Do I Purchase Small, Affordable Assets?

This is where a brokerage account comes in. Everyone should have a brokerage account because it grants you easy access to the stock market. The stock market can seem like this distant, confusing thing that is only for hedge fund managers on Wall Street, but that couldn’t be further from the truth. The stock market IS easily accessible and we are actually in the midst of a huge opening of the stock market to everybody. But, you need a brokerage account to tap into it. A brokerage account is simply an investment account that allows you to buy and sell securities like stocks, bonds, and mutual funds (and sometimes cryptocurrency, too). When you hear people talking about their investment portfolios, they are often referring to their brokerage accounts.

With a brokerage account, you can buy stocks and REITs (Real Estate Investment Trusts) that will become part of your own investment portfolio. You can buy just a single share or, in some cases, you can even buy fractional shares. For example, if you wanted to invest in Amazon, you’d have to fork over $3,266 just for a single share today. With fractional shares, you could just purchase $50 worth of Amazon and own a piece of a share. A lot of brokers that allow you to purchase fractional shares let you start with as little as $5. This makes investing in huge, successful companies really accessible.

How Do I Open a Brokerage Account?

First, you have to decide on a broker. There are plenty to choose from, but some are set up for new investors and offer more user friendly mobile platforms. As college students, I think using a broker that offers a really great mobile platform with options to buy fractional shares and open a Roth IRA (more on that later) is your best bet. The idea is to make collecting assets easy, and a user friendly broker that is geared toward the young, modern investor is what you’re looking for. My personal recommendation is to use WeBull. It’s very straightforward, they offer IRA accounts, they have fractional investing available, they offer incentives for referring others (which can really add up), there is no commission for stock trades, they currently have bonuses specifically for college students, and the platform offers decent charting and stock information. You don’t need anything too fancy if you’re investing for the long haul (which is what I’m recommending for college students with little to no investing experience), so WeBull works really well for this.

For college students with a .edu email address, there is a special promotion for you running from now until November 1st, 2021. When you open an account using your school email, you get a chance to draw a prize.

Prizes available for students with a .edu email address. Click the image to get started.

In addition to getting a chance at one of the prizes for students, you’ll get two shares of a stock for free when you sign up via this link here. That is my referral link so I do earn free shares when you use it. After you have your account set up, you will also have the ability to give others your referral link and can earn more free shares as well. What’s great about this is that you can collect quite a bit of free shares of stock all while introducing your friends to a valuable investment tool.

Once you open your account on WeBull, you’ll get one free stock and the second comes once you fund your account. You can fund your account with any amount of money. I recommend for students on a tight budget that you just start with $5-$10. Each month, you can another $5-$10 and invest those small amounts into stocks at a set date each month. What I do not recommend is trying to trade in and out of stocks for a quick profit. That is how you lose money, and it’s much more difficult to actively trade in and out of stocks than anyone on the internet makes it seem. You want to invest your money in good companies that will grow and be profitable over time. Finding solid companies that pay dividends is a good place to start. you can also look into ETFs (Exchange Traded Funds) that have dividend yielding companies for a more diversified and safe portfolio. Looking into REITs (Real Estate Investment Trusts) is a great way to get yourself invested in real estate without having to buy property. A quick Google search of “Dividend Stocks,” “REITs,” or “Dividend ETFs” will give you a place to start in your hunt for your first investment.

If you are one of my former high school students who has added me on Instagram or Snapchat, feel free to send me a message and chat about investments. I love talking about this stuff, you guys are some of my favorite humans, and I’d love to help you out with setting up financial goals for the future. And, honestly, we should have been spending more time working on financial literacy while you were still in high school.

Why Open a Roth IRA in College?

Retirement is probably one of the last things on your mind as a college student because it’s so far away and doesn’t seem to have much bearing on what’s going on in your life now. But, some of the most financially comfortable retired people are the ones who started thinking about it way before their peers.

Open a Roth IRA and start making monthly contributions. If you open a WeBull brokerage account, you can also open a an IRA right on the same platform. You should choose a Roth IRA over a Traditional IRA because of the tax benefits over time. With a traditional IRA, you use pre-tax dollars to fund it, so you can write off your contributions when you file your taxes each year. As a college student, it’s very likely that you do not to need to start looking for tax write offs. With a Roth IRA, you put in after-tax dollars. When you retire, you pay ZERO tax on your Roth IRA distributions. With a traditional IRA, your distributions are taxed as you take them. Your 401ks and other retirement accounts you gain through employment will be taxable once you retire. This is why you should open a Roth now. If you open a Roth and fill it with stocks that grow in value over time, you do not have to pay taxes on those gains. It’s a huge advantage to add a Roth IRA to your financial plan and the earlier you start, the bigger your tax-free payouts will be when you retire.

Remember, Collect Assets

Your goal should be to collect assets in any way you can. Opening a brokerage account and just putting a few dollars in regularly is a really easy way to begin that process much earlier than most other people. Even if you just put in $5 a month, you are learning very important skills about investing, and you are laying the foundation for a secure future. So much emphasis is placed on doing well in school so you can secure a job out of college, but that isn’t a certainty, especially now. I graduated from college right in the middle of The Great Recession, so finding full-time work took a lot of effort compared to those just a few years before me. It’s always good to have your own plans and financial safety nets because who knows what state our economy will in in the next couple years.

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