July 2003

Investing Early, Investing Often for Students
by James Chenoweth

The Federal Reserve lowered rates again the other day, and that got me thinking about all the school loans I have. I am going to be able to lock in those school loans (over a hundred thousand dollars in sum) at a ridiculously low rate when I graduate. I'll never pay those down! I can pay those back at the slowest possible speed and use the money I'll save to buy stocks and bonds. It's ridiculous.

When it came time to bust out with a July article, I decided that y'all could use your extra summer time to start researching good investment opportunities. The average kid with just a little saved up can start immediately, opening an account on Ameritrade.com, E-trade.com, or RushTrade.com. Yahoo and CNN both have excellent sources for financial information to do research (finance.yahoo.com or money.cnn.com). You can sit there and research stocks, bonds, currencies, or derivatives your entire life if you wanted to.

Now, I am not a broker or anything of the sort, so I expressly relieve myself of any liability for however you screw up your finances through these sites. This article is purely for entertainment purposes only. I have no financial background and no expertise in the financial world or in any other world than my own personal fanciful one, for that matter.

At any rate, even though the market is in the dumps, the opportunity to make money is still out there. Although stocks are typically what everyone buys, try your luck at a more stable investment like bonds or mortgage-backed-securities (basically stocks in peoples' mortgages).

A large advantage you have now against your future self is time. Although most people want to get in when they have money, just putting in a little now can really pay off in the future because of the time value of the money you invest. Money today is worth exponentially (literally exponentially) more than money in the future. Get yourself in quickly, and if you lose a little, you'll have learned a lot by the time you are a working individual with more cash to invest. If nothing else, you can write it off as a learning experience.

In addition, you have more time on your hands to research the financial market now than you ever will again. Take advantage of the DSL line your dorm room provides you to get real-time information on your investments quickly. I guarantee you will not have near as much time when you are older, so waiting to get in the game is a poor excuse.

Alright, so hopefully, I have pepped you up a little, and now I'll give you another disclaimer. I have talked about these Internet resources with which to research investments. Despite the many legitimate sites out there, there are many bad apples. In fact, when I was at the Securities and Exchange Commission for an internship, I investigated a few of them. Many no-name chumps will try to beef up the stocks they own through the Internet. Beware of personal web pages that have the "Hot Stock" or "Pick of the Week." These guys get in a cheap, low volume stock worth pennies, use their web page and chat rooms to quickly increase the value, maybe only a few cents, then dump their stock. The effect can make them thousands of dollars in just a few minutes, and they can do it multiple times a week through different chat names, websites, etc. You will buy on the rise and will have only minutes to sell your stock before the individual (call him the "defendant") dumps his shares and everyone will be left with no one left to sell to.

So, do your homework and stay clear of the bad guys. More information on these "pump and dump" schemes is available at the SEC's website.

Good luck, and happy trading!