A Beginner's Guide to Investing As a Teen

What is the most sought-after thing in the world? Of course, it is none other than money.

Life’s three necessities are food, water, and shelter, but in today’s world, you need money to attain these. Money can get you anything you want, depending on the amount. Naturally, you are going to want to earn more money. If you are like me, you probably started thinking about how to make money once you were around 12-13, and there are only two plausible options. You can either get a job, with options from babysitting to being a McDonald’s cashier, or you can invest that little amount of money you’ve been saving in your piggy bank since you were in second grade. Even if you only have a singular penny to your name, you can still invest it and make profits. In this article, I'll teach you the basics of investing, including how to invest, what to invest in, and how to maximize your profits.

If you are under 18, the first step is asking your parents to help you open a custodial brokerage account. A custodial brokerage account is an account for minors, where the minor is the beneficiary of the account, meaning the minor invests and receives all the profits, while the parent or guardian is the custodian, meaning they manage the account until the minor reaches adulthood, which at that point, the ownership will fully transfer.

There are two types of custodial brokerage accounts. The first is a Uniform Gifts to Minors Act account or a UGMA. With this type of account, you can invest in financial assets, such as stocks, bonds, index funds, etc. The other is a Uniform Transfer to Minor Act account or UTMA. This type of account will allow you to invest in assets such as real estate and fine art. 99% of you reading this, including myself, don't have thousands of dollars to invest in real estate, and thus should look into opening a UGMA. For where to open your UGMA, I would strongly recommend Acorns because of their Early investment feature and because it takes under 5 minutes to open an account, making it easier for you and your parents or guardian. Once you open your account and have some cash in it, you are ready to invest.

The three most common financial assets to invest in are stocks, bonds, and index funds. Stocks, or equities, are a security that gives you small ownership of the company. They are predominantly sold on the stock market. Stocks have no guaranteed profit, making them one of the riskier investments. However, as they say, the higher the risk, the higher the reward. Bonds are essentially you loaning money to the issuer of the bond, who can be companies or governments. The issuer of the bond will pay you back the value of the bond, along with interest, which usually is paid twice a year. Bonds will typically have a lower return than stocks. However, if you buy a guaranteed bond, you will have guaranteed profits, which stocks do not have.

Finally, there are index funds. Index funds are a portfolio of stocks and bonds designed to mimic components of a financial market index, including its performance. Index funds are cheaper than actively managed funds, while also following a passive strategy. This means you aren't going to make big money within a few days. The most popular index funds follow the S&P 500. The S&P 500 index follows the top 500 publicly traded companies in the U.S. Most index funds are low-risk because of their extraordinary diversity. After doing your research, I suggest developing a portfolio of stocks, bonds, and index funds. Remember, stocks provide high-risk, high rewards, bonds provide stability but lower returns, and index funds provide diversification and steady growth over time.

To make the most you can, the very first thing you must do is research. Don’t just read this article and immediately jump into the market thinking tomorrow you will wake up a millionaire. I have included my sources at the bottom of this article, so consider reading them to learn more about what I have discussed here. Take time to learn about the companies you want to invest in, how they have historically performed, different market trends, and any relevant news that could hurt or help the company. The second thing you must do is realize that thinking long-term is much more sufficient. While the short-term market is constantly fluctuating, the market has always and will always continue to grow over time. Patience and discipline are the keys to successful investing. Finally, don’t try to do it all by yourself. Seek advice from your parents, relatives, friends of parents, parents of friends, and even professionals. Success is almost guaranteed when you take help from others who know what they are doing.

One last word; don’t make investing your entire life just yet. Focus on school, getting good grades, graduating high school, and pursuing higher education. While making money from a side hustle such as investing is nice, it won’t be nearly as much money as how much you will make in the future with an actual job once you graduate from college or trade school. If you are still interested in full-time investing, consider a career in investment banking. Lastly, remember to take your time, don’t rush into things, and good luck! I wish you all successful futures in investing and whatever you decide to pursue in the future!

Author Arjun Abhilash is a sixteen-year-old first-generation American with a love for dogs, sports, and roller coasters. In his free time, he enjoys going out to eat with friends and watching movies with his family.

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A Beginner's Guide to Investing As a Teen

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