How to Start Investing as a Teen
Even at a young age, with the correct guidance and planning, you can start investing.
By investing consistently when you are young, you will allow the process of compounding to work to your advantage. The amount that you invest will grow substantially over time as you earn interest and receive dividends, and as share values appreciate.
Here are some steps you can start taking as you start your investment journey!
Learn the basics of investing
Before you start investing, make sure to learn some of the basics of the stock market, and how to invest in stocks. The stock market is made up of exchanges, such as the New York Stock Exchange and the Nasdaq. Stocks are listed on a specific exchange, which brings buyers and sellers together and acts as a market for the shares of those stocks. The exchange tracks the supply and demand and directly related, the price of each stock.
Besides stocks, there are many other options to start investing in. Some include Mutual Funds and ETFs, Bank Products, Saving for Education, Initial Coin Offerings and Cryptocurrencies, Commodity Futures, Security Futures, and Insurance
Find Your Investing Identity
As you begin investing, you might wonder what type of investor you are. This depends on the goal you are trying to reach with investing. For example, growth investing may be for those who are risk-takers, while income stocks may be for those who like to play it safe and steady.
An important part of your identity as an investor also comes in the form of whether you are into active or passive investing. Active investing requires a hands-on approach, while passive investing involves less buying and selling and often results in investors buying index funds or other mutual funds.
Discover the right investments for you
When investing, you must choose a few investment companies in which you decide is the right fit for your future goal. To do this, you can do some research about the past histories of a companies’ stocks to gauge an understanding of how much they can grow and provide income.
You also need to familiarize yourself with the basic outline of financial statements, to help you predict if a company will survive economic hardships.
Here is an example template of a corporation’s income statement to give you a simple introduction:
Open and fund your brokerage account
After you’ve done your research and feel prepared with your knowledge on investing, you can start by opening and funding an online brokerage account. You must be at least 18 years of age to do this, so have your parents help with this step if you are under the age requirement.
This process is quick and easy and only takes around 15 minutes to complete. A great way to start is by setting up an account at ETrade https://tinyurl.com/mrx8tncr. It customizes your specific plan and helps guide your choices as a beginner investor.
Make your first investment
Once you have set up your first brokerage account, it’s time to make your first investment! If you are investing in a stock, you can either start by organizing a market, limit, or stop order. As a beginner, a market order may be a good option for your first purchase. A market order is an order to buy or sell a stock at the market's current best available price. A market order typically ensures an execution, but it does not guarantee a specified price. Market orders are optimal when the primary goal is to execute the trade immediately.
Last but not least, make sure you submit the order during the stock market hours. Typically the NYSE is open from Monday through Friday 9:30 a.m. to 4:00 p.m, EST.
Now, repeat the process and continue adding money to your brokerage account. Continue buying shares of the companies, or index funds you’ve invested in.
Before you know it, you will be building a diversified portfolio and through these investments, you will be growing your long-term wealth!