The stock market is an excellent way to make money, and the younger you start, the better it will be. By investing young, you’ll be able to start enjoying your profit when you’re an adult. If you decide to keep the money invested until retirement, you have the chance of enjoying a sizeable nest egg. But how old do you have to be to invest in stocks?
Consider the story of Sudarshan Sridharan who made a lot of money investing in Tesla while still in high school. The student also earned money from investments in Google and Netflix. He was able to give himself a headstart in life by investing young. Although you can’t open an investment account until you’re an adult, that doesn’t mean you can’t start early.
How Old Do You Have To Be to Invest in Stocks?
Investing is easier than ever, and there are apps like WeBull or Robinhood that look great for youngsters to use. The problem is, you can’t open a brokerage account until you are 18 or 21, depending on your state’s laws. This is unfortunately a legal requirement for investing, and there are no loopholes for underage people to get accounts. What you can do is open a custodial account like Sudarshan Sridharan, which will be managed by a parent.
In a custodial account, a parent or legal guardian opens up an account in your name and can then gift funds into it. The limit is $15,000, but this is more than enough for any youngster to get started with investing. Even with the funds in your custodial account, the actual trades will need to be done by your guardian. Your parent or guardian will maintain control over the account, and you won’t be able to exercise any control over it. With that said, it’s important to make sure the person in charge of the account is someone you can trust completely.
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Why You Should Start Investing Young
There are so many reasons why you should start investing while you are young. The earlier you start, the more money you can earn from your investments. Since you are starting young, the amount invested can be smaller. By starting early and keeping up monthly investments, you’ll be able to reach life milestones quicker. You’ll have the money for things like cars or houses in a timely fashion.
If you make investing a part of your life, then you’ll ultimately improve your spending habits. As you put money aside for investments, you’ll learn not to waste money and how to divide a fixed income. You’ll want to ensure you have money for your investments before making your monthly budget. Where other people might waste their money on frivolous activities, you’ll learn to be more future-focused.
By investing while you are young, you’ll be able to enjoy the long-term benefits of compounding. Compounding is the process of interest being paid on the interest you earn. As a small example, if you invested $1000 in a dividend-paying stock at 5% you would get an additional $50 payout. The next year you would get 5% of $1050, which is $52.50, the following year you will get a payout on $1102.50, and so on. That’s not including the price the stock could increase by. Compounding allows you to earn more money and the earlier you start the more successful your compounding will be.
High Growth Stocks
Another benefit of investing while you are young is that you can take more risks. Some stocks carry more risk to invest in than others, but as you start young, you’ll be able to recover from bad investments. Early investors in companies like Apple, Tesla, Google, and so on have gone on to make a lot of money from these stocks. Each of these stocks has been considered high-risk in the past, but has proven to be very successful.
High growth stocks can see you generate profits faster than the average for the industry. Although these stocks do carry more risks, if you conduct proper research, you will be able to find promising companies. If you’re starting young, then you should take more risks and invest in companies with the potential for speedy growth.
How To Identify High Growth Stocks
To identify high growth stocks, you should look at companies that can capitalize on new and long-term trends. As an example, Netflix has been a high growth stock, as it launched the first streaming service which was both new and had long term potential. Today, Netflix is a highly successful company and the industry is here to stay.
Things like digital advertising and eCommerce have long-term growth potential as more buyers and sellers go online. So companies like Facebook and Google provide great investment opportunities as they’re able to provide digital advertising solutions. Storefronts like Shopify and dropshipping businesses like Alibaba have seen strong growth in recent years.
Keep on top of the news and try to identify future trends as soon as possible. The trick is to start investing in these companies as early as you can. The earlier you can get your stocks, the more profit you stand to make. As well as future trends, there are mainstay trends that will always be worth investing in. Things like computing, food, healthcare, and energy should provide good growth as well.
Conclusion: How Old Do You Have To Be To Invest In Stocks?
If you can convince a parent to help you open a custodial account then you can start setting up your future today. Investing young can provide you with a great safety net and the potential to set you up for life. Read about financial news and keep on top of the latest trends. Diversify your investments between stocks. Keep topping up your investments and watch your profit levels rise. Make sure to get in early with any companies you spot as having high growth potential.