Time is money — and for college students, all you have is time. The sooner you start, the more time your money has to grow, setting up your financial future.

There are common misconceptions about investing. People often conjure up an image of someone bent over a laptop, peering at blinding line graphs on the screen as they quickly buy and sell stocks — otherwise known as day trading. Another misconception is that investors need to be older with a high-paying job to start. 

That is not investing. 

“When you invest for the long term by putting your money in good companies and financial instruments, everybody can win. It’s a positive sum game compared to trading,” Danling Jiang, Stony Brook University professor of finance and the associate dean for Programs at the College of Business, said. “You have to manage your own money for a lifetime — it’s a basic skill like cooking, so you can build a strong foundation for financial security and resilience.”

Augustus Dibenedetto, a senior double majoring in applied mathematics and statistics and business management with a concentration in finance at Stony Brook, started investing two years ago. He also is the president of the University’s Investment Club.

“Before I was investing, I was just sitting on my money because I didn’t know what to do with it and I thought the stock market was too risky. I didn’t want to lose any money,” Dibenedetto said. “But I realized there are better things than your bank account only giving you two percent and to get over that initial fear, I took a very risk-averse approach to investing.”

He invests into stock index funds like the S&P 500 and balanced his portfolio risk with some bonds. 

So what does it actually mean to invest? 

Investing means putting your money into different assets like exchange-traded funds (ETFs) or other stock index funds, mutual funds, bonds, cryptocurrency and more. It’s vastly different from day trading. When you invest, you are seeking long-term growth and protecting your finances against inflation. 

“The dangers to not investing is this thing called inflation and as prices of goods go up, your buying power decreases. So if you put money in a savings account that’s only giving you 2% but inflation is coming at 10%, obviously you’re losing buying power,” Thomas Tallerico, an adjunct finance professor at Stony Brook, said. 

Compound interest explains the slogan “time is money.” In a normal savings account, the bank pays you a stable interest rate — a small percentage of the amount you initially put in, known as the principal. With compound interest, instead of only earning interest on your original amount, you start earning interest on both your initial deposit and any interest that has already accumulated. For example, if you invest $100 at a 5% interest rate, after the first year, you’ll earn $5, making your total $105. The next year, you’ll earn 5% on $105 instead of just $100, bringing you to $110.25.

In its simplest form, it’s exponential growth. 

“Even if you have a couple hundred dollars, or less, don’t be afraid to start investing in good blue chip stocks like Apple or Microsoft. Just get comfortable and get your feet wet with understanding how the stock market works,” Tallerico said. “Don’t keep all your money in a savings account with 2-3% interest. You need long term growth and high returns to accumulate wealth and that’s what the stock market will give you over time.”

Here are a couple steps to start investing.

1. Learn the art of budgeting

Before jumping into the stock market, one of the first steps is assessing your current financial situation and learning to budget. 

“‘How do you put your finances in order?’ It’s a broader question than investing. Investing is only the last several steps,” Jiang said. “Your education is really an investment from a financial perspective because [return on investment where you go to school] is actually the biggest financial decision for college students.”

She added Stony Brook students are already in better financial positions because the University offers relatively low-cost, high-value education compared to private institutions with a steep price tag. Jiang conducts a yearly “Student Financial Literacy and Personal Finance Survey,” the data of which is illustrated below. According to this year’s report, 36% out of 240 respondents reported they have student loans and 43% said it’s debt they are most concerned about.

“Find sources of income, if you don’t already have one,” Jiang advises. “Some stable part time jobs will give you an additional layer of financial security and help you build your funds. With earned income, you can invest for your retirement with Roth IRAs and let that money grow tax-free.”

Once you figure out what you currently bring in, you should adjust expenses into four categories: needs, wants, savings and investments. This will also help you manage credit card debt and organize a student loan repayment plan.

“Investing and saving needs to be two separate buckets. Investing is going to go up and down every single day. What you don’t want to do is put your rent money into the markets and have that vary,” Kevin Matthews II, the founder of financial education platform Building Bread and a former financial advisor, said. “I see too many beginner investors do that and now they cannot pay rent or their rent doubled and they can’t take their money out [of the market] immediately.”

Matthews also uses social media platforms like Instagram and TikTok to spread his reach. He currently has a little over 20,000 followers on Instagram. 

The second step to managing your finances is building an emergency fund.

“Try to have $2,000 in your checking account to cover anything unexpected. This will give you financial peace and you can have a good night's sleep,” Jiang added. 

Learning money management and developing financial literacy is crucial to investing and financial security. Only 12% of 182 respondents consider themselves to be very informed in money management, which includes various aspects of spending, saving, debt and investing. Jiang advises you should only start to invest once you build up these skills.

“I'm not pulled onto so much cash anymore. Spend a bit more wisely. Instead of going to the convenience store and buying $10 of snacks, I buy in bulk to save money over time or take that money and put it into the S&P 500,” Dibenedetto explained. 

2. Where to invest and risk management

You analyzed your cash flows and are comfortably managing your personal finances. Now, you’re gearing up to invest. But where should you invest and what are some of the risks? 

Some investments include stocks, certificates of deposit, bonds, funds like index funds or mutual funds and trusts. 

“I suggest new investors to start with ETFs, or index funds to get comfortable with the whole process,” Tallerico said. 

The reality is we won’t all be like Warren Buffett, who became a self-made multi billionaire by defying investment trends. Financial advisors like J.L. Collins warn against timing the market and picking individual stocks; instead, they suggest that beginner investors consider index funds, such as the Vanguard Total Stock Market Index Fund Admiral Shares.

“You shouldn’t waste two hours everyday looking at market trends because frankly that’s not enough time,” Dibenedetto said. “I’m more of a passive investor and that’s what I pass on to people. If you don’t study the market [eight to] 10 hours a day, you shouldn’t be trading.”

Stock index funds are baskets of various stocks from multiple companies across different industries, typically designed to mirror the overall market's gains. Investing into index funds offer a diverse portfolio, relatively consistent performance and low brokerage fees. However, picking out stocks tends to be more labor intensive since you have to research the company and analyze its finances. 

“The best thing to do is invest into Vanguard and ETFs, especially when you’re a beginner. Everything will be automatic and you are on the trajectory to financial freedom,” Jiang advises.

When it comes to getting started, you don’t have to do it alone. There are plenty of apps, including Vanguard, Robinhood, Fidelity and Acorns, with hundreds of different investment options. Some of the apps even feature built-in educational posts and virtual advisors. Research will become your best friend throughout the entire process, so choose a vehicle that works for you. 

Another factor you would have to consider is risk. To readjust risk in your portfolio, you could consider adding more bonds and mutual funds relative to stocks. However, Tallerico advises against this if you are a young investor.

“Risk management becomes more important as you get older in life. If I invest in risky stocks, I’m looking at trouble because I’m getting up there with age,” he said. “Students should not worry. They should take risks at an early age because over the long haul that will give them higher return. They have many years to overcome that risk because their investments will go up.”

People tend to avoid investing due to a fear of losing money. Historically, the stock market always goes up over a long period of time. Take the 2020 COVID-19 pandemic, for example. The market crashed in March 2020, with the S&P 500 dropping about 36%. But by the end of the year, the market recovered and grew double digits.

“People were going crazy, selling left and right. But the people who are rich today were the ones who either (A) held or (B) bought more,” Matthews said. 

In light of the election, some economists worry that President-elect Donald Trump’s policies could lead to “overheating” and cause an economic downturn. Tallerico says to not let this deter you from investing.

“Presidents come and go. Economies come and go. Wall Street is only concerned with corporate earnings,” Tallerico said. “If you diversify enough, you’ll cut some of the fears you have. I have to worry about it because of my age but you young people can live through it. When things go down and go low, use that to buy in.” 

Bryan Kim, a senior biology major at Stony Brook, used to be afraid of the market for that exact reason but once he began to learn how the market works, he felt the thrill of investing. He started investing in index funds this past March.

“Red isn’t a bad thing when you invest for your future. It’s an opportunity to buy more at a discounted price,” Kim said. 

3. Stay informed and keep it simple

Finance tends to be a fast moving industry, especially with the emergence of the volatile cryptocurrency market and the growing tech sector. It’s easy to get caught up in this whirlwind. 

Richard Chan is an associate professor in the College of Business who conducts research on the intersection of cognition, affect and entrepreneurial finance. 

“There are three types of cognitive styles, analytical processing, intuitive processing and emotion-based decision-making. From my study I found those who prefer to rely on analytical processing tend to have a more diversified portfolio and can hedge against various risks. Those who use intuition tend to make snap judgments and put all their eggs in one basket,” he said. “I would suggest students to slow down a bit, collect more information and try not to be influenced by the market trend.”

Dibenedetto echoed this sentiment.

“I learned to be more thoughtful in my life from investing. Not to act so rashly and to think more on the data presented to you,” he said. “In other words, before you do something, think about the known and unknown variables and how that can affect your decision.” 

The key phrase here is research, research and more research. Dibenedetto suggests consulting websites like Investopedia, The Motley Fool and Yahoo Finance. 

Matthews said investing now is easier than ever with the internet, since there are experts on various social media platforms helping people for free. In fact, social media is the second highest source of financial information after family and friends in the Stony Brook financial literacy survey. However, Matthews also noted social media red flags.

“You have to really listen to how the person speaks. For example, anytime you hear someone talk about guarantees, that’s very, very dangerous in the finance world. Another red flag is somebody flaunting their private jets and fancy cars. It's marketing — these people are trying to sell you something versus educating you,” he said. 

Lastly, keep it simple. 

“Don’t overthink it. People want to do crazy things and it doesn’t work long-term. It’s not a smart move. Just invest in low-cost stocks and keep investing after the initial deposit,” Matthews said.