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Investing for teens
Ready to break into the stock market? You’ll likely need a custodial account.
Swapping stocks isn’t the only way to invest in your future — there are numerous ways to build a portfolio. But if you’re bound and determined to play the market, there are accounts that allow teenagers to trade.
How old do you need to be to invest?
You generally need to be at least 18 to open an investing account, but that doesn’t mean you can’t start learning if you’re younger. There are many ways to invest with various levels of risk:
|Investment method||Minimum age to invest||How it works||Risk level||Can your parents help you open an account under 18?|
|Opening a savings account||18||Low||Yes — choose from youth, joint and custodial accounts|
|Opening a CD||18||Low||Yes, custodial CDs are available|
|Opening an IRA||18||Low||Yes, custodial Roth IRAs are available|
|Signing up with a robo-advisor||18||Moderate, depending on your risk tolerance||Yes, custodial accounts are available|
|Buying stocks||18||High||Yes, custodial accounts are available|
Is there any way to invest without a parent?
No, most savings and investment accounts open to teenagers are custodial accounts that require parent or guardian consent. A custodial account is a legal agreement between the account holder and the bank or institution that issues it. If you’re younger than the age of majority for your state, you can’t legally enter into this agreement without your parent or guardian’s consent.
How to buy stocks as a teenager
There are two ways you can invest in stocks as a teenager:
1. Open a custodial account
A custodial brokerage account requires a parent or guardian to open on behalf of a minor. Your parents will have control over the account until you’re an adult, making investments on your behalf and transferring the assets of the account to you once you’re of age.
Custodial brokerage accounts come in two varieties: Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) accounts. UTMA accounts allow for a broader range of investments, most notably real estate investments — while UGMA accounts are more limited. Most states only offer UTMA accounts.
There are many brokerages that offer access to custodial accounts, including:
2. Advise your parents
If your parents are good with it, explore the possibility of them purchasing stocks on your behalf. If they already hold a brokerage account, they can use their own. If not, do some research and find a platform that interests you. If both you and your parents lack trading experience, limit your research to platforms that cater to new traders, like Robinhood.
Do your homework and find out the minimum amount required to open an account, and what types of stocks the platform offers access to. The experience can provide both you and your parents with an opportunity to learn more about investments and the stock market.
Risks of investing
Before you start exploring any platform or account options, familiarize yourself with some of the biggest risks associated with making your own investments:
- Losses. Investments — especially stock market investments — are inherently risky. If the company you invest in does well, so will your portfolio. But if that company underperforms or goes out of business, you may lose some, or all of your money.
- Complex. There’s no way around it: the world of investments is complicated. And if you don’t understand what you’re investing in, you risk funneling funds into an asset or company that wastes your time and money.
- Volatility. Even with a solid understanding of the market under your belt, things can go wrong. And that’s because the stock market can rise and fall drastically with little warning.
- Fees. While commission fees are less common than they once were, account fees are common and you may still face commissions on certain types of securities.
Other ways to learn about the market
There are plenty of ways to learn more about investing. With more knowledge, the better equipped you are to make smart investments and minimize potential losses. Any of the following resources are a solid place to start:
- Stock trading books. There are helpful books on investing that can start building your knowledge, including How to Make Money in Stocks by William J. O’Neil and Market Wizards by Jack D. Schwager.
- Stock trading channels. If reading isn’t your thing, try YouTube. Content creators upload video tutorials covering investment basics.
- Stock trading games. Stock market games help you hone your trading instincts with simulated markets and trading goals.
- Paper trading. Arguably the closest you can get to real trading without risking a penny is paper trading. An account lets you play with virtual money on a hypothetical market that mirrors live market pricing. Not all brokerages offer access to paper trading, but some firms, like Webull and TradeStation, offer free paper trading accounts.
Compare stock trading platforms
If you plan to open a custodial account, or if your parent or guardian is opening a new brokerage account so you can help them come up with trade ideas, you’ll want to compare your options to find the best fit.
The world of investments is exciting — but it isn’t without its risks. Ultimately, the best investment strategy depends on your goals. No matter what type of investing you’d like to try, you’ll likely need a custodial account to get started if you’re younger than 18. Explore your brokerage options to find the platform best suited to your interests.
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