College is an expensive time to be alive for many students. With textbook rentals, tuition, meal plans and more, coming to school is a pricey ordeal. Consequently, it is easy to spend excess money on alcohol, video games or food. And without parental pressure, thoughts of savings and fiscal responsibility go by the wayside.
However, the time to start educating yourself on smart investing and managing the risks associated with choosing stocks is now.
Saving and budgeting is important. And now, there is a new opportunity to make money.
A new app targeting millennials named Robinhood is sweeping across the nation. Since its beginning in 2015, Robinhood has been a commission-free app dedicated to stock market trading.
By providing a few items of personal information, like a driver’s license picture and social security number, college students can start investing in companies as large as Amazon at $950 per share or as small as my personal favorite, Delcath Systems, at 15 cents per share. Robinhood makes all of this possible without any complex processes or the fees traditionally associated with investing.
While Robinhood is a phenomenal opportunity — and it is certainly an impetus for millennial investing, just like the market — there is an associated risk. The rising emphasis and media coverage on technology and innovation creates a severe danger for overvaluation.
In particular, millennials can prove susceptible to perceiving our favorite companies as more valuable than they really are. Perfect examples include commercial titans like Amazon and Tesla.
While many students consistently use Amazon Prime, Amazon is pushing in a variety of directions at the same time. That can be risky business. Amazon has enormous costs for maintaining warehouses, and it is also not the profit-machine that their advertisements might indicate.
In the case of Tesla, the company does a phenomenal job of selling the image of a world of electric cars. But right now, Tesla’s business model is appealing to high-income individuals. This limits their ability to saturate in the market. So while Tesla's stock price may have overtaken Ford's, it is no guarantee that we will see Teslas on every street.
In all, this is a prime time in life to start investing. With decades to come, college is the perfect time to set aside $5 that could turn into millions of dollars. However, it is important to invest small and to pick companies with a lot of room for growth. If hype is already high, it is more difficult for stock prices to rise.
While investing is an engaging way to keep up with the business side of the news, it is critical to remember that the market only represents investors' confidence in a company. And while there are plenty of worthwhile stocks currently on the market, leaders in technology are not the way to go, at least not until share values drop.
