Investing as a teenager is now a more normal occurrence than it was a few decades ago. So much information is available for teenage investors who want to build their wealth over time. As a teenager, you will need help from your parents to get started. Most parents do this by setting up a custodial account or a joint brokerage account for their teenager.
So what are the things to look out for when starting as a beginner investor? We have listed five tips to get you started.
Table of Contents
1. Start by Learning the Basics of Investing
There are basics to consider when you want to start investing in the stock market. Here are a few of the things you should know:
One of the greatest misconceptions about investing is that you need a lot of money to start. It doesn’t take much money to begin – you can start with a small amount you won’t miss. This brings us to our next point.
Use spare money!
You should always invest money you don’t plan to use within the next five years. That means the money you invest will be money you have to spare. As a teenager, chances are you don’t have a lot of things to pay for because your parents will be handling that – so now is the right time to start investing.
Keep on going!
Set aside money to start investing and stick to it. Your money will grow over time, and you should aim to keep investing even when it seems like the markets have taken a dip. The markets are volatile, and when the value of the stock goes up, it will come down again one day and then it will go back up again – that’s just the way the stock market works.
2. Set Realistic Financial Goals
Before you start investing, you should have a financial goal in mind. First, you need to understand what you are saving towards – it needs to be a long-term goal you have in mind.
Examples of financial goals
- Saving for a home
- Saving for retirement
- Saving for college fees
- Saving for a wedding
As a teenager, these events may seem far away, but time creeps up, and the longer you save, the more time you have to meet the goal.
Set SMART goals
Once you have your goal in mind, it is time to set a SMART goal which stands for:
- Specific: Your goal should be clear and precise.
- Measurable: Your goal should be tracked regularly. You should be able to see if you are on track to meet your goal.
- Achievable: Your goal should be possible.
- Realistic: Make sure the goals you have set are realistic and attainable. For example, if you know you can’t afford to invest a monthly sum of say $100 for the next few years (as your goal requires), adjust your numbers until it is realistic.
- Time-based: When do you want to cash in and complete your financial goal? Write it down.
- Focus on Building a Diversified Portfolio
When you start investing, there are many different industries you can invest in. Whether it’s the rental market, health space or even a different market entirely outside of the US, make sure you buy stocks and shares in various ones. Investing in broad indexes such as the S&P 500 or an ETF (exchange traded fund) gives you exposure to broader markets diversifying your portfolio.
By diversifying your investment portfolio, you can benefit from the following things:
- An improved long-term portfolio performance.
- A reduced risk.
- A safe capital.
4. Invest Regularly and Stay Disciplined
The markets can be quite volatile, and at some points it might seem like your teenage investments are wasting away. Of course, stocks and shares will plummet, but the best thing you can do is stay the course. You don’t need to quit at points like this because the markets will recover.
At the start of this article, we also mentioned the need to invest an amount you will not miss. So, every month, a set payment amount (that you won’t miss) can be invested in the stock market. Doing this will ensure you keep the habit going for a long time.
5. Seek Guidance from Experienced Investors
As a new investor, you must ensure you are getting the right advice about where to invest. There is so much information about the stock market, and it is easy to get the wrong advice. So, ensure you seek information from verified sources, including banks, building societies, and stock magazines.
You can also become well-versed in the stock exchange language by reading things like the Wall Street Journal and various apps about investing.
In closing, if you want to start investing, you should know it is never too early because the earlier you start, the more time you have to reach your financial goals. Therefore, before you start investing, you should set SMART goals that are specific, measurable, attainable, realistic, and time-based. Lastly, always remember that the stock market value rises and falls constantly, so the best thing you can do is to diversify your investments – to reduce the risk of losing your capital.
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