You’re never too young to be interested in the stock market, but you may be too young to start investing by yourself. However, we don’t think that should stop you from learning the “craft” while you’re still a teenager. There’s a way for you to invest in stocks even before you turn the legal age (18,19 or 21 depending on your state), and it’s called opening a custodial stock investment account.
In this article, we’ll go over the various advantages of experiencing the stock market while you’re still below the legal age to invest by yourself. So, without any further ado, let’s get to the bottom of it!
In most states, you need to be at least 18 years old to invest in stocks
As we’ve mentioned before, to get started at the stock market, you’ll need to be at least 18. Some states require you to be even older, so make sure to check what the regulations are in your specific state.
Of course, not being 18 doesn’t have to stop you from investing, as long as you get your parents to cooperate. Custodial accounts are the only way to start investing before you’re of legal age to do so by yourself. Naturally, your parent/legal guardian will have the last word to ensure the safety of your assets. After you turn 18, you can transform this account into a general one and start trading on your own.
Unfortunately, there’s no other way for you to experience the ups and downs of the stock market while you’re still a minor. So, if your parents or guardians aren’t willing to open a custodial investment account, there’s not much you can do. If that’s the case for you, we suggest you take your time to learn as much as you can before finally venturing into the stock market once you’re old enough.
Learning about the stock market
Knowing when the right time is to invest in a stock and how to do it efficiently is a science on its own. Most of it will come from experience, but you can’t start building your portfolio without studying the basic concepts first.
Some colleges and even companies offer courses and programs you can take advantage of. Also, it doesn’t hurt to invest in high-quality literature that can help you start your journey as effectively as possible. Finally, if you have someone in your family who’s a successful investor, try getting them as your mentor. Look at what they do and try to learn from their experiences before you can start investing yourself.
As you already know, the stock market is an unpredictable place. Still, investing and trading with stocks is far from gambling. As long as you have the necessary knowledge and skills, you’ll quickly see some success.
How to persuade your parents to open a custodial account for you?
Some parents may not understand your passion for the stock market, and that’s perfectly reasonable. However, we’re sure you can make them reconsider once you show them how serious you are about the entire deal. Besides, as they’ll be in full control of the account, they’ll have nothing to worry about. Make sure to explain your reasoning and show them that you have a real plan for your future investments.
Why should you rather start sooner than later?
Starting to invest early in life provides you with the experience that can put you ahead of others. As stated at Loved.com, it’s the same as with professional artists or athletes: rarely any of them started their careers in adulthood. So, the earlier you start, the better the results will be, especially in the long run.
Keep in mind that the road to success isn’t a straight line. You’re likely to encounter some hardships and failed investments at the beginning of your journey. The younger you deal with those failures, the faster you’ll grow from them.
The skillset you acquire will make you more financially responsible once you’re an adult
The benefits of investing as a teenager are many. Besides gathering the necessary experience to become a successful investor in the future, you’ll also learn more about finances and financial risks. As the saying goes: the higher the risk, the higher the potential profit, right? Well, besides that, you’ll learn when the risk is worth taking and when it’s not. That knowledge can be applied in places other than just the stock market. You’ll learn how to manage your finances, and become much more financially responsible in the long run. Losing on a big investment will teach you the value of money and the importance of smart money management.
Research the companies you want to invest in
Once you’ve learned enough about the stock market, and you got your parents to open a custodial account for you, it’s time to start investing! Make sure to research potential companies whose stocks you’re planning to buy. The company has to have some growth potential to be a good pick for investing.
You can start your research by checking the company’s public annual report. You can find a lot of information about their business success in these. Also, make use of different analytic tools you can find online to determine whether a company is worth investing in or not.
Overall, market knowledge isn’t enough for you to become a successful investor. You’ll also need to gather information about specific companies you’re planning to invest in. Once you do, talk to the adult who manages the custodial account, and you’re ready to go!
The bottom line
All in all, custodial accounts are the only way you can invest in stocks before you’re an adult. The account will be managed by your parent, guardian, or a friend who’ll essentially invest on your behalf. Still, you’ll be included in the process, which will provide you with the necessary experience to become a successful investor once you’re old enough.
Starting early is always a good idea, especially if you feel like this may be your profession later in life. Learn as much as you can, talk to your parents about your plans, and you’ll be able to start your journey before you even know it!