If you have a newly found interest in the stock market and its workings, you probably have a lot of questions along the lines of “how it works;” “how old do you have to be to invest in stocks;” “is there no way to invest if you are a teenager;” and much more. These are just the most commonly asked questions by the younger lot of interested investors who want to learn and explore how the market actually works.
The thing with investment, be it learning the workings or landing opportunities, is that people don’t consider investors belonging to the younger age group to have the same wisdom and ability to make smart decisions as to the older, considerably more experienced investors. This is true for many big investment opportunities, but there are always completely legal options to utilize your money if you want to invest and reap its benefits. Investing in stocks is one of those ways that lets you start young and build yourself up to learn and experiment as you go.
As a young investor, you have more of a risk-taking mindset than when you are an adult. Making mistakes at a young age seems less formidable to yourself whereas older people tend to take much fewer risks because they want concrete results. If and when you decide that you want to explore investing money through stocks, even if it’s not with a big goal in mind, just to learn about the market, it is important to surf through your options. Here are a few common queries answered as FAQs:
How does the stock market work?
The finance world revolves to some extent around the stock market. Nasdaq and New York Stock Exchange (NYSE) are two US-based stock exchanges where people get the opportunities to work with and invest in different companies. The exchanges include trade between buyers and sellers, where either come to trade stocks in any particular public company. Buying stocks in any public trading company gives you a % of ownership over its assets and thus on the profits. But it’s a risk game. Just as sure as it can lead you to earn profits, you can also lose your money if the particular company that you invest in does not do well in terms of earnings and that is how the market works.
Can you invest in stocks at 16?
In most states across the country, the legal age to be able to invest in stocks is somewhere between 18 – 21. But there are other ways you can invest than directly buying shares of a company. The government and financial institutions realize the number of young people who inherit money or earn on their own that can be utilized in the market.
Do you have to be 18 to invest in stocks?
A somewhat similar question as above, but to clear it out, different states have different legal ages to invest in stocks and a majority of those have 21 as their minimum age requirement, making it difficult for even adults below the age of 21 to invest in many states. The reason behind this as it seems is to make sure the adult is responsible and mature enough to understand the protocols and requirements of all things stocks-related.
How important are Brokerage Accounts for investment?
Brokers are a very important part of the whole stock exchange business. Previously, the practice was that you buy stocks through your contracted Brokerage account and they get a commission over the profit you earn from those stocks. But technological advancement has brought us to a point where there are many options offering zero commission investment opportunities along with easy app options to learn and browse through your options. There are traditional options of Brokers as usual for the conventional investors but considering that this article is specifically to help the younger lot, the technologically advanced brokers might sound more enticing.
How to get into the stock market as a teenager?
Now coming to the last question: how do you exactly invest if you cannot buy the stocks. The government has established something called custodial accounts that you can own in place of brokerage accounts, a few examples are Uniform Transfer to Minors Act (UTMA), the Uniform Gift to Minors Act (UGMA) and another one is the 529 savings plan. In all cases, a child is supposed to be the beneficiary of the money saved or invested through either of these plans.
These were all the common questions asked that we thought could be answered to help young investors. This is just the start that will open up a lot more opportunities once you start investing in the stock market. There are always risks involved in every project, financial or otherwise, and investing in stocks is no different. Market risk and financial situations that dictate industries are just some examples. But starting sooner helps you learn at a young age and within a few years, you will understand everything.