## Does Investing in Stocks Affect FAFSA?
The Free Application for Federal Student Aid (FAFSA) is used to determine a student’s eligibility for federal financial aid. One of the questions on the FAFSA asks about the student’s assets. This includes any money in bank accounts, stocks, bonds, and other investments.
**How Does FAFSA Define Assets?**
FAFSA defines assets as anything of value that you own. This includes:
* Cash
* Savings accounts
* Checking accounts
* Certificates of deposit (CDs)
* Stocks
* Bonds
* Mutual funds
* Real estate
* Cars
* Boats
* Jewelry
**How Does FAFSA Treat Investments?**
FAFSA treats investments as assets. This means that the value of your investments will be counted when determining your eligibility for financial aid. However, there are some exceptions to this rule.
* **529 plans:** 529 plans are tax-advantaged savings plans that are used to save for college. The value of 529 plans is not counted as an asset on the FAFSA.
* **Coverdell ESAs:** Coverdell ESAs are another type of tax-advantaged savings plan that can be used to save for college. The value of Coverdell ESAs is also not counted as an asset on the FAFSA.
* **IRAs:** IRAs are retirement savings accounts. The value of IRAs is not counted as an asset on the FAFSA.
**How Can Investing in Stocks Affect My FAFSA?**
Investing in stocks can affect your FAFSA in two ways:
* **It can increase your assets.** If you invest in stocks and the value of your investments goes up, this will increase your assets. This could make you ineligible for some types of financial aid.
* **It can decrease your assets.** If you invest in stocks and the value of your investments goes down, this will decrease your assets. This could make you eligible for more types of financial aid.
**Should I Invest in Stocks If I’m Planning on Applying for FAFSA?**
Whether or not to invest in stocks if you’re planning on applying for FAFSA is a personal decision. There are both risks and benefits to consider.
**Benefits of Investing in Stocks**
* **Potential for growth:** Stocks have the potential to grow in value over time. This means that you could end up with more money in the long run if you invest in stocks.
* **Tax advantages:** Dividends and capital gains from stocks are taxed at a lower rate than ordinary income. This can save you money on taxes.
**Risks of Investing in Stocks**
* **Volatility:** The value of stocks can fluctuate significantly over time. This means that you could lose money if you invest in stocks.
* **Risk of loss:** You could lose all of your money if you invest in stocks.
**Alternatives to Investing in Stocks**
If you’re not comfortable with the risks associated with investing in stocks, there are other ways to save for college. Some alternatives to investing in stocks include:
* **Savings accounts:** Savings accounts are a safe place to save money for college. However, they typically offer a lower rate of return than stocks.
* **CDs:** CDs are another safe place to save money for college. They offer a fixed rate of return, which means that you’ll know how much money you’ll have at the end of the term.
* **Bonds:** Bonds are another type of investment that can be used to save for college. Bonds are less risky than stocks, but they also offer a lower rate of return.
**Conclusion**
Whether or not to invest in stocks if you’re planning on applying for FAFSA is a personal decision. There are both risks and benefits to consider. If you’re not comfortable with the risks associated with investing in stocks, there are other ways to save for college.