Think You’re Too Young To Start Investing In The Stock Market? Think Again.
In today’s information investors and traders are starting to invest in stocks at younger ages than the generation before them. Thanks to the advances in technology we have direct access to anything we want to know with a click of a button. If you want to learn about investing you’d probably search in Google, “How old do you have to be to invest in stocks?”. The good news is that becoming financially literate has no age restrictions. The same can’t be said for the majority of investment accounts.
Most brokerages require you to be a minimum of 18 years old in order to be able to open a brokerage account in your own name. This is also the age when a person is legally classified as “an adult” and can enter into contracts legally on their own. But there are options for younger investors to start investing in the stock market, which we’ll cover in this article, so keep reading. No matter what age or investing experience you have, it’s never too soon or too late to start investing.
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I’m Old Enough: Where Do I Start?
If you meet the age requirement and want to start investing here’s what to do next. First, decide what type of investment strategy you want to have. The second is finding the right brokerage for you. For new readers, a brokerage account is unlike a traditional bank account. A brokerage account gives you access to a wide range of investment products to choose from. Most commonly stocks, bonds, options, exchange-traded funds (ETFs), and mutual funds.
You basically open the account, fund it, and use that money to purchase investments. Yes, you own the money and the assets in your account and for the most part, can liquidate them as needed (this is not the case with every account). The brokerage you choose you can think of as a middle-man between you and the investments you want to purchase. The best part is, you can open up a brokerage account from the likes of Interactive Brokers, TD Ameritrade, E-Trade, or Robinhood all from the comfort of your home, and it only takes a couple of minutes to get set up.
It’s important to add that you should always do your own due diligence on and research the brokerage before you open up an account with them. Choosing the best brokerage in 2021 really comes down to personal preference. But here are some things to take into consideration as you’re shopping around.
Things To Consider Before Choosing Your Brokerage
- Fees: Always ask about what fees are associated with the brokerage firm. Whether that’s a trading commission, options trading, research, or real-time data fees. You just want to make sure you’re ok with the costs associated with having your investment account with that company.
- Tools & Resources: If you’re a new or experienced investor you need the proper tools and educational resources to succeed. When you choose a brokerage, ask them about what tools and educational resources they offer for their customers.
- Is The Platform Easy To Use: It never hurts to ask for a demo of the brokerage’s online platform. The last thing you want is to sign up for a brokerage account that you can’t navigate. Remember, you’re investing your hard-earned money; you want to make sure you feel comfortable using whichever investing or trading platform you decide to choose.
- Minimum Balance Requirements: Do you know how much money you want to invest? Some investment accounts require you to have a minimum balance in the account. Look around to see which investment account best fits the amount you’re going to invest. As well as your investment strategy.
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I’m Not Old Enough: How Can I Get Started Investing?
There’s a lot of ways you can get started investing in the stock market today, even if you’re not old enough to legally open up your own brokerage account yet. Most people associate custodial accounts with investing for minors. The Uniform Transfer to Minors Act (UTMA) and the Uniform Gift to Minors Act (UGMA) accounts give parents the ability to save and invest in a child’s name. It operates to the same tune as a standard brokerage account. For example, anyone can contribute to the account, there are no contribution limit restrictions, and you can buy and sell investments. Once the minor is at the age of 18 or 21, depending on the state the investor lives in, they then will gain full control over the account and its assets.
Another option is what’s called a 529 savings plan. This is a state-sponsored investment account created for the financial goal of paying for college or university and the costs associated with it. An adult does have to open a 529 savings account. However, they will assign a child as the beneficiary who will be able to use those funds to pay for qualified expenses for college, private primary, or secondary education.
Similar to a UTMA or UGMA account, the account holder can buy and sell investment products within the account. But the options have are usually significantly more limited than a standard brokerage account.
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Bottom Line For All Investors
Despite the limitations surrounding minors and investing, here’s what I’ll leave you with. You’re never too young or too old to start your investing journey. The best time to start investing in the stock market is right now. The earlier you start investing the more time you’re giving your investments to grow. This is what makes investing in the stock market one of the best ways to build long-term wealth in today’s society. Don’t you think?
