Disclaimer: The views expressed are the author’s opinion and do not constitute financial advice. Readers should conduct their own research before making investment decisions.
The U.S. stock market shapes the livelihoods of many students. According to a World Economic Forum survey, 70% of retail investors are under the age of 45. In many ways, that is great. Investment can build wealth, though there is risk attached to it.
Unfortunately, financial literacy in the United States hovers around 50%, according to the survey. This is concerning, given the rise in young investors. Apps like Robinhood have helped increase the accessibility of investing, but the risk is the same as ever.
The fact that so many investors are younger is a positive thing. But recent rapid stock growth might be misleading. An example of this appears in the Standard & Poor’s 500 (S&P 500), an index that has an 80% market capitalization and tracks 500 leading companies.
Employment figures and consumer confidence metrics give more insights. Unemployment has risen and while the increase isn’t drastic, it could be worse, as it doesn’t cover September or October 2025 because of the government shutdown.
Then there’s income growth. After adjusting for inflation, it has neared decade-long lows for individuals between the ages of 25 and 54. Additionally, the University of Michigan’s Surveys of Consumers highlight a 24% decrease in consumer sentiment, which was attributed to high prices from inflation.
The S&P 500 tracks hundreds of the largest publicly-traded stocks in the United States, which can help determine the health of the U.S. economy. Unfortunately, the index weight is warped by certain companies. In August, the Information Technology sector made up 34% of the S&P 500’s weight.
Consumer staples, energy, utilities and real estate, when combined, make up less than half of that. But it gets even more concerning. Nvidia Corporation is at the top of the list with an 8.06% weight. That’s almost as much as the entire healthcare sector as listed on the S&P 500. Additionally, Microsoft has a 7.37% weight and Apple has 5.76%.
A lot of this growth came from investor confidence in AI, as demonstrated by the 51% surge in Nvidia’s stock this year. Because of this, it became the first company to hit a market cap of $5 trillion. It may also indicate an AI bubble.
The S&P 500 is supposed to help prevent risk by spreading over a wider range of stocks, but as shown above, certain companies are dominant within the fund.
So what should a college student do? When investing, it’s risky to put all your eggs in one basket. That’s why students should diversify their portfolios if they haven’t already. Despite issues with the S&P 500, it’s overall a great asset.
Companies like Vanguard can help new investors minimize the usual fees. Also, consider holding bonds. They are considered safe investments, though their potential return might not be as high as stocks. Another option is just putting your money into a savings account.
Savings accounts have the lowest potential return, but it is the safest possible option if the bank is FDIC-insured, which means that if you have $250,000 or less in there, it will be reimbursed. Certificates of deposit are another great decision. They will hold your money for a fixed time period, but it has a higher interest rate.
Investing in Index funds, whether it’s within the U.S. or internationally, can help serve recent college graduates in the long-run, according to CNBC.
Of course, there are many other options. Gold and silver are valuable assets. So is everything from Legos to wine. Just be aware of where your money is going and make sure you don’t always bank on high returns.
Mark Butler is an Economics major at Florida State University and a Staff Writer for the Views section of the FSView & Florida Flambeau, the student-run, independent online news service for the FSU community. Email our staff at contact@fsview.com.
This article originally appeared on FSU News: The risks behind the AI gold rush
Reporting by Mark Butler, Staff Writer / FSU News
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