It's All About the Future...
A stitch in time saves nine –and a penny invested today at a daily interest rate of 100 percent will be worth more than 10 million in a month.
While it’s practically impossible that you’ll find quite that rate of return on the stock market, financial professors at Texas Tech say the sooner you start investing your spare change, the better.
“I recommend students try to do some investing as soon as possible,” said Dr. Scott Hein, professor of finance. “I think at some point everybody’s probably going to have to be doing some investing, and I think it’s easier done when you’re younger, and you’re starting out with smaller amounts.”
The sooner students begin to invest, the more time their money has to grow, according to the Financial Planning Association Web site, found at http://www.fpanet.org . Moreover, the longer the money has to build, the faster it’s growth rate increases.
Dr. Bill Dukes, professor of finance in the college of business, said he believes investing is a wise step for students.
“It’s saving for the future, and getting started soon,” he said. “Because the compounding is what’s really going to make it good later on down the road.”
Students can begin by visiting the Morningstar Web site at www.morningstar.com , where they can learn helpful information on stocks and on the current state of the market, he said.
Dukes said students should look into no load investments, and avoid working through a stockbroker.
“If you go to a broker, they’re going to charge you five or six percent,” he said. “In other words they get the money, you don’t.”
But for students who are new to the world of investing, brokers may offer helpful advice for a time, Hein said.
“I think if the student is exposed to the basics, they could probably do it on their own,” he said. “If not they really should use a broker, it really depends on their comfort level.”
If students do choose to go through a broker, they can choose between a full-service broker who will offer advice, and a discount broker who will charge lower fees, but offer no advice.
Much of what students need to know about investing can be learned from sites like Morningstar, or through classes offered by Texas Tech, said Dukes. Both professors recommend starting with Mutual Funds, which encompass a portfolio of stocks. Hein said this is an easy way to diversify a portfolio. According to the Financial Planning Association, diversifying a portfolio can help reduce risk, and improve overall performance.
Traded like a stock, Mutual Funds can be purchased over the Web, or through brokers. Hein said he recommends researching funds before investing in them.
For more information on investing, visit the Morningstar Web site at www.morningstar.com, or contact Red to Black at (806) 742-9781. For helpful tips on investing from the Financial Planning Association, click here.
http://www.fpanet.org/public/tools/investing_brochure.cfm