Invest for success

Aiden Kim, Staff Reporter

As highschool students, it is about the time when we need to start thinking about saving up money for the future, specifically college. Which is probably around $200,000, which is a lot of money for college. 

Let’s do the quick math. The average college tuition is about 10,000 to 50,000 dollars a year. Let’s say you have $35,000 for tuition plus $10,000 for dorms plus $2,000 for extra stuff like textbooks and food. Add all of this together ($47,000 a year) and multiply by four years. That’s $188,000 a year, and this is just an essential cost. I know. It’s scary. 

To save money for college, you need an income, but as a high school student it’s hard to get a full-time job. Even if you do have a job, it’s still probably not enough, and you need to trade-off time from sports or academics. 

In order to generate income during the school year, you need a passive income. In other words, you need to use money to make money. Something also known as investing. I get it. It sounds boring. You buy stocks for a company you never heard of before and hope to make money off of it. BORING. 

Fortunately, if you invest correctly, you can make attractive returns, like 150 percent more than your initial investment from something called compound interest. Basically, your investment makes money from the profits, and it gets bigger and bigger over time. 

To put this into numbers, let’s say you started to invest $10,000 and added $100 every month and made 8percent in returns from your investment every year. In just four years, you can make $19,426. Just imagine adding $200 every month; you will have $25,083 from the original $10,000 investment. 

But how does this all work? Some stocks go up and down. It’s risky, and many people don’t have time to analyze each stock from the balance sheet, cash flow, and income statement. Once again, BORING. 

The best stock to invest in is actually not a stock at all. It’s called an index fund. Basically, it’s an investment package deal that has different stocks from different sectors. An index fund is different from individual stock because of its diversified portfolio, meaning there is a lot of different stocks, so individual risk goes down and most of the time, it tracks the U.S. economy, so it always goes up in the long term. 

The most famous index fund is called the S&P 500 Index. Returns on the S&P 500 Index in 2016 were about 10 percent, and in 2019 it was an astonishing 31 percent return. Yes, sometimes, it goes down, like during a COVID-19 recession, but it’s just a part of the business cycle. It expands and drops but in the long term, just like the U.S. economy.

So the million-dollar question is when should one start investing in an index fund? It’s actually during a recession because the stock price and index price are down, so everything is cheaper on the market. 

At the end of the day, you need to do your own research if you want to invest your hard-earned money. Remember, from the track record of our stock market, it was always going up, but there is still risk involved. Investing is not easy, but if you do it correctly, it can be really powerful.