How to Invest as a Teenager or Minor
Investing as a teenager provides you with a significant financial advantage as you get older. Not only do you have more time for funds to accumulate, but you can benefit from compound interest and youth tax breaks.
How Old Do You Have to Be to Invest in Stocks?
Minors can’t invest in the stock market by themselves, teenagers under 18 included in that group. They need to open a custodial account.
What is a Custodial Account & How Does One Work?
A custodial account acts as a type of financial account an adult maintains for another person, often a minor. The two basic types of custodial accounts are the Uniform Transfer to Minors Act (UTMA) accounts and Uniform Gifts to Minors Act (UGMA) accounts.
How to Invest Under 18: Investing as a Teenager
Diversification is essential for investment strategies at any age. The best investments for a teenager will include a combination of stocks, mutual funds, and exchange-traded funds (ETFs).
Consider Paper Trading Apps
Before purchasing stocks, make sure to thoroughly research any you are considering. Some people choose to take investment classes first.
Invest in Individual Stocks
Choosing to invest in dividend-yielding stocks as a teenager can become very lucrative long-term. Dividends represent payments made by companies representing a percentage of their profits given back to investors.
Invest in Mutual Funds
The fund manager is in charge of trading the fund’s underlying securities. Typically, mutual funds are safer than investing in individual stocks because the risk is spread out among many investments.
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