UPDATED: March 2022
How to Invest as a Teenager – It’s never too early to start investing, and if you’re a teenager, you can get a head start over your finances if you start investing early. Even though the coronavirus pandemic has hurt the stock market and has caused the economy to flounder, it is still a good time to invest. Warren Buffet, who is probably the most famous investor of all time, learned how to invest as a teenager and managed to build a billion-dollar empire with his investments.
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How to Invest as a Teenager
If you are a teenager who is thinking about investing some money into your financial future and build a diverse portfolio, you have come to the right place. We will share the best tips on how you can invest money as a teenager. Here is what you need to know:
Hurdles of Investing as a Teenager – Trading for Beginners
Before you decide to invest in the stock market, you should know that you will not be eligible to open a brokerage account as a teenager. However, you can use plenty of apps to start investing as a teenager, but you need to be at least 18 years of age, so you shouldn’t let this stop you. That is a legal requirement of the investment industry, and there is no way you can get around this restriction.
The best option for you would be to think about opening a custodial account, which your parents or guardian can maintain. You can invest through an adult with these accounts, and when you reach the legal age to invest on your own, the account will go back in your name. Here’s what you should know about custodial accounts.
What Are Custodial Accounts and How Do They Work?
A custodial account is an account that your guardian or parent will open and in which they will “gift” funds. They can gift up to $15,000 in this custodial account, and once the funds are in the account, you can start investing them. However, your guardian or parent will make the actual trades, as they will have complete control over the account.
You can still be part of the investment process and select your specific investments, asset classes and create a portfolio allocation. When you reach the legal age to invest in your state, the account’s ownership will be converted to you. The experience you will have gained from the custodial arrangement will help you manage the account in the future.
Diversify Your Custodial Account – Investing for Beginners
The best thing you can do when investing as a teenager is to diversify your custodial account, which means mixing up different kinds of investments. There are several types of investments that can help you, including investing in stocks, investing in low-cost mutual funds, and opening a high-yield savings account as well. The more diverse your custodial account is, the better returns on your investment you will get since you will have multiple ways to earn revenue.
Conclusion to How to Invest as a Teenager
Now you have learned How to Invest as a Teenager. Next, you might want to know what are 3 of the most popular investments for young people today. To find great opportunities to invest as a teenager (investing for beginners) consider these articles:
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