While looking at their bill at the end of the month, credit card holders will usually see a small charge from their credit card company. This is called “interest,” or in other words “an amount paid by a borrowing party for the use of a lender’s money,” according to studentfinancedomain.com.

In this situation, cardholders are borrowers and companies such as MasterCard and Visa are lenders. Fortunately, everyday people and college students have an opportunity to turn the tables and profit by becoming lenders themselves. This is the practice of investment.

But when and how should a college student with no money or knowledge of the trading market begin? According to San Diego State finance professor Carl Colombo, young people should start investing as soon as they have available income, because compoundable interest works best with time. If a person invests $100 into a security (any type of investment) and has an annual return rate of 10 percent, they will gain $10 in one year. After another year, if the return rate stays the same, the investor will gain 10 percent of $110. In time, the return rate increases and, after 40 years, the brave soul who invested $100 will have more than $4,500.

How a young person invests is completely up to them. According to Colombo and Internet blogs such as “The College Investor,” individual retirement accounts are a promising avenue. With basic IRAs, people can purchase securities with the money they have and collect untaxed interest. However, this money cannot be touched until the investor is 59.5 years old and it becomes taxable once it is taken out. Roth IRAs work the same exact way, however, the money is taxed while it is invested and free of tax once it is taken out.

The College Investor also suggests investing in bonds. An individual can loan an organization money and a specific percent of that money is guaranteed back. Most likely the return will reap a profit. Exchange Trade Funds are mutual funds traded as stocks on the basis of a predetermined trading pattern. Because a professional investor takes less time to handle each investment, these funds are more affordable to begin.

However, there is more to investment than just placing money in a fund and collecting it 10 to 40 years down the road.

“(Students) need to study the market carefully and become familiar with industries, sectors and the competitive market,” SDSU Department Chair of the Finance Department Mehdi Salehizadeh said. “They need to get as much information as possible before investing.” According to Salehizadeh, the U.S. Securities and Exchange Commission, an organization dedicated to protecting investors and maintaining a fair and organized marketplace, could be a good place to start.

Colombo said novice investors can begin their search for knowledge with the Internet.

“It provides access to such remarkable, rich information for investors,” he said. “Today the real issue is to sort through information efficiently to get to the heart of the issue. If you go to the bookstore and look at investment textbooks, you will see a remarkable number of sites that will enable you to do 100 times more than I could in 1974.”

He suggests looking at mutual family fund websites such as Morningstar, T. Rowe Price and Vanguard to gain familiarity with the market and access to helpful investment tools.

Beginning investors should also look into diversification, or investing in multiple funds.

“From 35 years of experience in investment management, I have oftentimes found a particular investment that I didn’t think was very promising turnout to be the best investment of the year,” Colombo said.

Being the faculty adviser for The Aztec Equity Fund, a graduate program that allows students to research the competitive market and actually invest, Colombo has recently been reminded of how unpredictable the market can be. After one student made what appeared to be a strong investment in a Canadian uranium mining company, natural disaster struck Japan and havoc was wreaked by uranium-run nuclear power plants. Immediately the world’s confidence in nuclear energy dropped and brought down the value of the investment with it.

“This goes to the heart of the uncertainty of investments, and often we know less about a particular investment than we think we do,” Colombo said.