Today’s graduates famously start their professional lives with limited finances. Of course there are exceptions among individuals. But for the most part, the combination of high tuition, crippling student debt, and challenging job markets makes it difficult for young people to have too many spare funds. By extension, this means that the same young adults are often limited when it comes to investment.
Illustrating this point in part, we’ve looked into worthy investments for graduates before, and focused more on comforts and protections than actual investments. We recommended buying a Costco membership to make shopping cheap, for instance, or purchasing renter’s insurance to protect against damaging fees. These remain good ideas for young people starting off in the “real world” — but what about actually growing wealth? How can young people today invest with the limited funds they have available?
We have a few ideas….
If you’re familiar at all with the idea of mobile platforms for investment, you may have heard of Robinhood. Among a few apps leading the way in this category, Robinhood was designed in part to make stock market investment cheaper and easier. A recent look at some of the app’s planned service changes characterized it perfectly, calling Robinhood “an ultra-low-cost way to invest.” That basically says it all. This and a few apps like it (Stash, for example) have given young people a way to buy real stocks with small investments and negligible fees. Naturally, it’s harder for these small accounts to earn significant returns, but the apps still open a new door for affordable market trading.
Another interesting option is CFD trading for stocks, which also lets young people invest in real stocks without needing to spend too much upfront. This is partly because of how CFD trades work — as contracts concerning market movement rather than actual share purchases. One can arrange a CFD concerning Apple’s stock, for instance, without needing to purchase pricey shares of Apple. Additionally, though, CFD trading carries the advantage of leverage. While it carries some risk, leverage enables traders to make small deposits but trade with more significant amounts of money — sometimes up to five times more than the deposit amount.
For those young people who want to invest with small amounts and minimize risk as much as possible, another option is to simply avoid traditional markets altogether and opt for savings accounts. These may be less exciting, and they don’t carry the potential for significant gains. But for measured, gradual, predictable gains over time, they can be excellent options. A regular savings account won’t yield much of a return, but there are various types of “high-yield” arrangements that can mature more significantly with certain conditions (such as leaving savings in the account for a predetermined amount of time).
Alongside more traditional investments, cryptocurrency can also be an interesting option for young people. One reason for this is because this generation has seen first hand that a relatively modest investment can pay off in a big way. A piece on bitcoin investment written in 2018 pointed out that at that time, an investor who bought $1,000 worth of bitcoin in 2013 would have seen it grow to a value of $6,400 — and that’s nowhere near the biggest gains some early bitcoin investors saw. Granted you have to be fairly lucky (or prescient) to capitalize like that, but because cryptocurrency remains volatile, and many newer coins can be bought at low prices, this is another market that people with limited funds might explore.
Whatever the method, investment doesn’t always pay off, and it can be a daunting prospect for someone just leaving school. These are methods and markets suitable for low-fund investment though, which means they’re some of the ones young people might want to look into today.