How To Grow Wealth Legally as an International Student in USA

by | Feb 20 | 0 comments

How To Grow Wealth Legally as an International Student in USA

by | Feb 20 | 0 comments

Foreigners on F-1 Visa or H1B visa are limited on their options of how to make money in the united states. The USA government are opposed to international students making money outside of their campus job. The only other way they are able to make money is through internship programs, which is CPT or through OPT, which is the optional practical training. This is your standard 9-5 job and although it is good for sustainability, it will not make you rich. However, as an international student it is possible to grow wealth through investing. This could take sometime and a bit of patience. Investment strategies and wealth growth are hardly taught in colleges. Neither do international students learn these from their parents as they equally have no idea. I personally engaged in months of research, reading books, watching videos and taking courses. I perused the internet consistently and taught myself all I know about how money works in the United States. These are information I wish I was taught or told as soon as I turned 18. However, I am grateful to still know about it.

Although buying individual stocks are fine if you have a decent knowledge of how they work, that is not what I imply when I talk about investments. Investment here implies index fund or ETF investing. Index fund is a type of mutual fund which has a history of about 8% return yearly. As an international student, all you need to grow wealth is to invest in index funds. There a lots of index funds to consider, but the most popular are the S&P500, the total market and the NASDAQ. Owning an index fund gives you a leeway to own not just one stock, but a pool of stocks. An S&P500 index fund gives you ownership to 500 different stocks and the total market gives access to about 3000 stocks while the NASDAQ gives ownership of about 100 stocks. In other words, instead of owing 10 shares in Tesla and google, you could own Tesla, Google and hundreds of other stocks. To start investing in index funds, you need your SSN and a deposit. Depending on your brokerage account, this deposit could be as low as $1. In addition, investing in index funds is perfectly legal as a foreigner.

How to Start Investing:

1) Pay off all your debt: There are good debt and bad debt. Debt such as mortgage is a form of good debt, but high interest debt like a credit card debt is a bad debt. Credit cards have an interest rates of 15%-25%. This implies that when your full balance is not paid off at the end of the month, you are paying a high percentage in interest. Credit cards should be used only to build credit scores. Student loans are also a form of bad debt as a result of their interest rate. However when it comes to student loans, some people decide to invest while paying it off. This is because investment requires time before it grows and waiting to pay off the student loans could take about a decade. Investing $2000 each month for a decade would result in more than a quarter of a million dollars at an interest rate of 8%. Waiting to invest could does more harm than good

2) Have an emergency fund: Before you begin to invest, be sure that you have an emergency fund. This would ensure that you do not dip into your investments when an unexpected incident occurs. For wealth to be built and for investments to get returns there needs to be a consistent investment (biweekly or monthly) and no withdrawals. It is recommended to have about 6 months of emergency funds saved up, to avoid withdrawing money from your investments. I always told my story of how I survived for 6 months without a job, just with the emergency funds I had saved up.

3) Opening a Brokerage Account: The next step to investing is opening a brokerage account. Before opening this with any brokerage company, be sure to do your due diligence and compare not just the fees of that company but their customer service. I go into details in this post on the differences between the three most popular brokerages which are Fidelity, Schwabs and Vanguard. Personally, I use Fidelity to invest as it meets my particular needs. Compare the expense ratios of the index funds you are interested in for the different brokerages. A 1% fee could seem small, but in the grand scheme of things it is a lot of money

4) Begin to Invest: At this point, you have chosen the brokerage account you want. The next step is to begin to invest in index funds or ETFs depending on your preference. Be sure to actually buy an index fund such as the S&P500 and that your money does not just lie in the account. In addition, do not invest just once and forget about your investments. Rather invest as frequently as you can. I invest biweekly immediately my paycheck comes in. This is to reduce the impact of the volatility in your investments.

While working on a VISA, there are other ways to build wealth such as maxing out your 401k or Roth 401k. There is the HSA which is triple tax advantaged and there is the Roth IRA which is an individual retirement account. Be sure to read this post for more.

Disclaimer: None of the information given above is financial or professional advice. Rather, these are the steps I personally follow which currently works for me. Please consult your financial advisor if you seek financial advice

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