A stock is a type of investment that provides amazing opportunities to make money in a convenient way. Stock investment is a very important element of a financial portfolio and usually, grownup people invest in stocks. However, investing in stock will be an amazing opportunity for young people under 18 years of age as it is relatively easy to learn and understand. Research showed kids who start investing below the age of 18 tend to earn 3x-5x more money than the kids who don’t invest.
However, you can’t directly invest in stocks if you are less than 18 years of age. So, if your age is below 18 but wants to invest in stocks then you have to think of an alternative. There is a way you can invest in stocks while your age is under 18. You can invest in stocks via a custodial account which is supervised by your adult guardian.
What Is Custodial Account?
A custodial account is a type of account that allows young people under 18 years to invest in stocks. Parents, friends, or relatives can open a custodial brokerage account on behalf of the minor who wants to invest in the stocks. In this type of situation; the person who opens the account is known as the custodian and he/she control the account on behalf of the minor. Though the adult might have the ultimate control over the custodial brokerage account it will give you the opportunity to execute your investing idea and earn money. If everything goes accordingly, then you can take control of that account once you become 18 years old.
What Are The Best Online Brokers For Young Investors?
There are many online brokers available. Some of the best online brokers are:
1. Charles Schwab
3. Ally Invest
5. TD Ameritrade
6. Loved Investing
7. Fidelity Interactive Brokers
What To Consider While Opening A Custodial Brokerage Account
There are a few important considerations that you should take seriously while opening a custodial brokerage account. They are:
1. You should open a custodial account in a broker house that offers no stock trading fees for a custodial brokerage account. There are many online brokers available that charge $0 to buy and sell stocks.
2. There are many brokers available that require you to maintain a sizeable minimum balance in the trading account while there are other brokers that don’t require any minimum balance in the trading account. You should choose a broker that allows low-balance stock trading accounts.
3. As a minor investor, you should look for brokers that allow fractional shares investment. It means you can invest as little as $1 in reputable companies with high stock prices. This is a great privilege for young investors because of their limitation of budget or low budget.
What Stocks To Invest As A Young Investor
When you are trying to invest in stocks you will see lots of options. As a young investor, you might have limited knowledge and experience about all the available stocks. Moreover, not all stocks are worth investing in. Therefore, you should try to invest in stocks that are safer and will become interest-yielding assets for you. Some of the best stocks to invest as a young investor are:
1. Amazon (NASDAQ: AMZN)
2. Carvana (NYSE: CVNA)
3. JD.Com (NASDAQ: JD)
4. Dropbox (NASDAQ: DBX)
5. Square (NYSE: SQ)
6. Chewy (NYSE: CHWY)
7. Trade Desk (NASDAQ: TTD)
8. Voyager Therapeutics (NASDAQ: VYGR)
9. Upwork (NASDAQ: UPWK)
10. Champignon Brands (OTCMKTS: SHRMF)
FAQs About Invest In Stocks Under 18?
1. Can I Invest In Stocks At 17?
Directly, you can’t invest in stocks when you are 17 years of age. You will require a custodial brokerage account if you want to invest in stocks when you are 17.
2. Can I Use Robinhood At 17?
No, you cannot use Robinhood at 17. Though it is not illegal to invest in stock as a teen unfortunately Robinhood does not support custodial accounts. Therefore, you can’t use Robinhood when you are 17.
3. How Do Beginners Get Stocks?
If you are a beginner in stock investment then your best option is to put your money in an online investment account and then use the money to buy shares of stock or stock mutual funds. Don’t invest all the money in a single stock; try to invest in various stocks that have bright features.
4. Is Investing Under 18 Illegal?
No, investing under 18 is not illegal but you will require supervision from your adult guardian. If you want to invest in stocks then you have to open a custodial brokerage account.
5. What Should A Young Investor Invest In?
There are many investment opportunities where a young investor can invest. For example:
1. Invest in the S&P 500 index funds
2. Invest in real estate investment trusts (REITs)
3. Invest using Robo advisors
4. Buy fractional shares of a Stock or ETF
5. Open any retirement plan
6. What Is The Best Investment For Small Investors?
Some of the best investments for small investors are:
1. High-yield savings accounts
2. Certificates of deposit (CDs)
3. Money market funds
4. Government bonds
5. Corporate bonds
6. Mutual funds
7. Index funds
8. Exchange-traded funds (ETFs)
9. Dividend stocks
10. Individual stocks
11. Alternative investments and Cryptocurrencies
12. Real estate
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.