Teenagers and others who may not have reached the legal adulthood age should invest for a variety of reasons. The time they have to let their investments grow and appreciate in value is by far the biggest benefit. Although it can occasionally seem difficult to know where to start, it doesn’t have to be Young people can start their investment journey with the assistance of a variety of strategies and resources. The most crucial information about investing that teenagers should be aware of is broken down in this article.
It’s possible that some people believe that those who aren’t yet legal adults cannot invest. However, investing has no age restrictions, unlike the casino or bar. While it is true that most brokerage accounts require you to be at least 18 years old to open one, there are plenty of investing options available to those under that age, albeit they may require varying degrees of adult supervision or cooperation.
Custodial accounts allow individuals under the age of eighteen to start planning for retirement at an early age. An adult manages investments in a custodial account on behalf of a minor until the minor reaches the age of 18, or 21 depending on the state.
As a 17-year-old, you’re at an exciting stage in life where you can start building your financial future. Investing in the stock market can be a powerful tool for achieving your long-term financial goals, and the earlier you begin, the more time your investments have to grow.
However, investing as a minor comes with certain restrictions and considerations. This guide will walk you through the steps involved in getting started, ensuring you have a clear understanding of the process and the options available to you.
1. Understand the Basics of Investing
Before diving into the stock market it’s crucial to grasp the fundamental concepts of investing. Here are some key points to remember:
- Investing involves risk: The value of your investments can fluctuate, meaning you could lose money. However, over the long term, the stock market has historically trended upwards, making it a viable option for building wealth.
- Time is your greatest asset: The earlier you start investing, the more time your money has to compound and grow. Even small contributions can accumulate significantly over time due to the power of compound interest.
- Diversification is key: Don’t put all your eggs in one basket. Spreading your investments across different asset classes and industries helps mitigate risk and ensures your portfolio isn’t overly reliant on the performance of any single stock or sector.
- Set realistic goals: Determine your investment goals and timeframe. Are you saving for college, a down payment on a house, or retirement? Knowing your goals will help you choose the right investments and stay on track.
2. Choose an Account Type
As a minor, you cannot open a traditional brokerage account on your own. However, there are two account types that allow you to invest with the guidance of an adult:
- Custodial Account: This account is set up by a parent or guardian on your behalf. They will manage the investments until you reach the age of majority, at which point you can take full control of the account.
- Joint Account: This account is opened in your name and that of a parent or guardian. Both of you will have equal access to the funds and can make investment decisions together.
3. Research Investment Options
Once you have chosen an account type, it’s time to research potential investments. Here are some common options for young investors:
- Stocks: Represent ownership in a company. They offer the potential for high returns but also carry higher risk.
- Mutual Funds: Invest in a basket of stocks or other assets, providing diversification and professional management.
- Exchange-Traded Funds (ETFs): Similar to mutual funds, but trade on stock exchanges like individual stocks.
- Bonds: Represent loans to companies or governments. They offer lower risk and potential returns than stocks but can provide a steady stream of income.
4. Open a Brokerage Account
Choose a reputable brokerage that offers custodial or joint accounts and aligns with your investment goals. Consider factors like fees investment options and educational resources when making your decision.
5. Start Investing
Once your account is open, you can begin investing in the assets you have chosen. Start with small amounts and gradually increase your contributions as you learn more and gain confidence.
6. Monitor and Adjust
Investing is a long-term journey, and it’s important to monitor your portfolio regularly and make adjustments as needed. Stay informed about market trends, company news, and your own financial goals to ensure your investments remain aligned with your objectives.
Additional Tips for Young Investors
- Educate yourself: Read books, articles, and online resources to learn about investing basics and different investment strategies.
- Seek guidance: Talk to a financial advisor or experienced investor for personalized advice and support.
- Start small: Don’t feel pressured to invest large sums of money right away. Begin with small contributions and gradually increase your investment as you gain more knowledge and confidence.
- Focus on long-term goals: Don’t get caught up in short-term market fluctuations. Stay focused on your long-term financial goals and avoid making impulsive decisions based on market volatility.
- Be patient: Investing is a marathon, not a sprint. Building wealth takes time, so be patient and stay disciplined with your investment strategy.
Investing in the stock market as a 17-year-old can be an exciting and rewarding experience. By understanding the basics, choosing the right account type, researching investment options, and starting early, you can set yourself on a path to financial success. Remember to be patient, disciplined, and adaptable, and your investments will have the potential to grow and help you achieve your financial goals.
5 Steps to Start Investing as a Teen
What comes next for a young person who has made the decision to invest some of their money? The following is a step-by-step guide designed to assist teens in beginning their investment journey:
- Learn about investing: There are a ton of printed and web resources available to assist you in understanding the fundamentals. You can also ask your parents or someone else who has experience investing for advice.
- Establish your investment objectives. It’s critical to be clear about your ultimate goal. Clarity in your goals will help you choose an investment plan that suits your needs. What do you want to do with the money? Is it long-term?
- Choose investments: Looking into possible investments can seem overwhelming with so many options available. It is crucial to consider what kind of investment has the best potential to assist you in achieving your objectives.
- Create a brokerage account: To purchase and retain your investment assets, you must create an account. If you are under the age of majority, you can still start investing by opening a custodial or joint account with a parent, guardian, or other trusted adult, even though you cannot open a brokerage account on your own.
- Purchase the investment of your choice: It’s now time to implement your investment strategy. You should be able to purchase practically any asset on the website or mobile app of your brokerage platform, though the procedure may differ depending on the investment you’ve selected.
Is it Illegal to Start Investing Under 18?
While there are limitations, there are no legal prohibitions against minors investing. While it is usually not possible for minors to open their own brokerage account, they can start investing with varying degrees of adult supervision through custodial accounts and joint accounts.
How to Invest in Stocks for Teenagers 2023 (Step by Step)
FAQ
Is investing at 17 illegal?
Can I invest if I am 17?
Can I use Robinhood at 17?
How do I open a stock account under 18?
Can 18 & 19 year olds start investing?
Image source: Getty Images. First, the simple case: 18 and 19 year olds are teenagers, but in most states, they’re considered adults capable of signing their own contracts and opening their own investment accounts. For them, the process is pretty much the same as it would be for any other adult to get started investing.
Can a child own a stock if he is under 18?
For a child or teenager below the age of majority (usually 18) to own stocks, it gets a little more complicated. Those investments are held in a custodial type account. Those accounts are often known as a Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) accounts.
Can a teenager invest in the stock market?
You usually need to be at least 18 years old to participate in the stock market. However, there are some ways around that. Adults can open a custodial account with a brokerage on behalf of a child and then, in the role of custodian, invest in the stock market for them, with or without the teenager’s input. This is just temporary.
When can a teen start investing?
1. Fidelity Youth TM app Teens can start investing on their own at age 13—with some help from a parent or guardian through the Fidelity Youth Account. The parent or guardian must have an account with Fidelity and open the Fidelity Youth Account for the teen.