What Can I Invest My Money Into As A Teen

7 Steps to Investing as a Teenager

(How To Invest As a Teenager or Minor)

#1. Gain Stock Knowledge

The first step for teen investors (Teenvestors) and beginning investors is to learn the basics of stock investing. Without an understanding of investing fundamentals, you run the risk of quickly loosing whatever little money you cobble together to start building your nest egg.

One quick way to get knowledge about the stock market is to sign up for some online courses. We offer the TeenVestor Stock Certification Course which consists of text, video lessons, and quizzes to help you understand the stock market. There are other online courses available offered at platforms like Udemy to teach you about the stock market.

#2. Identify Your Interests

You may want to get started choosing stocks based on your own interests. By looking for stocks in which you have an interest, you are likely to be more engaged in trying to understand how the stock market works. Here are some hints about what to consider when choosing stocks as a beginning investor:

Your hobbies
Businesses in which your relatives work
Companies that produce some of the items your friends and classmates like
Companies discussed in business publications like the Wall Street Journal
Companies headquartered in your state
Big companies included in an index such as the Dow Jones Industrial Average

#3. Understand What Companies Do

As a starting point, you should get a copy of the annual report of the company in which you may want to invest. An annual report is a document used by most public companies to disclose corporate information to their stock holders every year. It is usually a state-of-the company report, including an opening letter from the Chief Executive Officer, financial data, results of operations, market segment information, new product plans, subsidiary activities, and research and development activities on future programs.

Sometimes, companies may use something called a "10-K" as a substitute for their annual reports. The 10-K is a filing required by the US Securities and Exchange Commission of all public companies. It contains much of the same information that companies put into their annual reports. A company like Apple, for example, uses the 10-K as its annual report. Here are some links to the annual reports of a few companies you may know: McDonald's , Apple, and Coca-Cola.

#4. Access Financial Data

At some point, you will want to get more detailed information about a company's financial performance (such as how much money it makes) compared to similar companies in the same industry. There are many different types of performance measures but you don't have to calculate them on your own. Many financial websites will provide the information you need such as Return on Equity, Earning Per Share, Price-Earnings Ratio, etc. – all important indicators for how companies are doing which you can learn in a stock market course. We use three main websites to get this data for any company we want to research: Yahoo!Finance , MarketWatch, and Morningstar.

#5. Experiment With Dummy Portfolios

Setting up a dummy trading portfolio is one way Teenvestors can overcome the fear of taking that first step in investing. There are a few sites that allow you to set up stock market games in which you can compete with your friends to see who has the highest profits in hypothetical portfolios you create with fake dollars. The sites tally up the daily portfolio values and rank them by usernames. Here are some dummy trading portfolio portals:

TeenVestor Stock Game
MarketWatch Virtual Stock Exchange
Wall Street Survivor
How the Market Works
TD Bank's Virtual Stock Market

#6. Choose the Right Online Broker

Minors are not allowed to own stocks, mutual funds, and other financial assets outright. In some states, minors are defined as people younger than 18 years old, and in others they are defined as people younger than 21. If you are a minor, you can make investments only under the supervision of your parent through a custodial account. You parent will have to sign you up for a custodial account offered by an online broker. You would own the assets in the custodial account, but your parent would control the investments in it (hopefully, with your help) until you are no longer a minor. Important considerations to choosing an online trading account include:

Looking for no stock trading fees – you should find online brokers that charge $0 to buy and sell stocks.
Looking for low balance stock trading accounts – make sure the online broker does not require you to maintain a sizeable minimum balance in a trading account; there are many that offer $0 minimum balance.
Look for brokers that allow for fractional shares – if you want to invest as little as $1 in reputable companies with high stock prices, you can only do so if the online broker allows you to buy fractions of a share stock.

Here are some online brokers you may want to investigate:

Charles Schwab
Stockpile
Ally Invest
E-Trade
TD Ameritrade
Loved Investing
Fidelity Interactive Brokers
Robinhood (Does not offer custodial accounts so it is not for minors)

#7. Avoid Scams

If someone promises you a profit that is much higher than you can get by investing in the stock market each year, you should run unless you really know what you are doing or you don't mind losing your money quickly. One adage that you should adhere to is this: high profit in any investment usually involves much higher risk.

For example, over the long run, the stock market will generally only yield you about 7%-9% interest rate over the long haul depending on what period you are measuring.

Yes, the return on the stock market can be extremely high (if you invest in an index fund that tracks an index like the Dow Jones or the S&P 500). For example, the return on a fund that invested in an S&P 500 index fund in 2020 probably yielded about 16.3% profit. But in 2008, the return of the same type of fund was probably around NEGATIVE 38.5%. So, no one can promise you a steady return each and every year if they invest your money in the stock market.

Anyone who tells you that they would like your money and that they will consistently get you a profit of say, 12% each and every year by investing in stocks (or in any other asset, for that matter) on your behalf is not being truthful about the risk they are taking with your money. We've seen investment offers that promise to pay sky-high interest rates for what are, at best, extremely risky propositions—and at worst, pure frauds. Here is a list of red flags that the Securities & Exchange Commission says should make investors suspicious of an investment offer:

It sounds too good to be true. Mom was right! Compare promised returns or interest rates with returns on a well-known stock index such as The S&P 500 Industrial Average. Any investment that promises you substantially more than these readily available indexes is, by definition risky. Risk is not necessarily a bad thing, because with more risk there is the potential that you can make more money. However, you should know how risky something is before investing in it.
An unusually high "guaranteed return." Most fraudsters spend a lot of time trying to convince investors that their investments offer extremely high returns, which are "guaranteed." If a person or a company that is not well known tells you that an unusually high return is "guaranteed," watch out!! Even if you know the company, if your guaranteed profit sounds too high, you may not be aware of all the risk involved.
A company that is not well known. If you've never heard of a company, broker, or adviser, spend some time checking them out before you make your investment. Most public companies make electronic filings with the Securities and Exchange Commission, or (www.sec.gov), and computer databases exist to help you research brokers and advisers. Your state securities regulator may have additional information. Incidentally, if a supposedly upright financial firm lists only a post office box as an address, you'll want to do a lot of work before sending it your money. And if anyone mentions the words "penny stocks"—stocks that trade for less than $1— run away as fast as you can.
Being pressured to invest "right now." Scam artists usually try to create a sense of urgency, making you think that if you don't act now, you'll miss out on a fabulous opportunity. But savvy Teenvestors take time to do their homework before investing. If you're being pressured to invest, especially if it is a "once-in-a-lifetime," "too-good-to-be-true" opportunity that you "just can't miss," just say no. Your wallet will thank you.
An investment that is hard to understand. Con artists frequently use a lot of big words and technical-sounding phrases to impress you. But have faith in yourself! If you don't understand an investment, don't buy it. If a salesman isn't able to explain a concept clearly enough for you to understand, it isn't your fault. Don't make it your problem by investing in the product.

How To Invest as a Teenager

Gain Basic Knowledge -- go to sites that specialize in teaching teens about about stocks basics (see: www.teenvestor.com/teen-websites)
Stick to Your Interests at the Beginning -- looking for companies that suit your interest will keep you engaged; later, you can expand your investment universe.
Find out Exactly What Companies Do -- you should know the business in which your company of interest is engaged.
Get Basic/Simple Financial Data -- getting and understanding basic financial measures will help you avoid serious investment mistakes.
Experiment With Dummy, Mock, Virtual, or Fake Portfolios -- several companies offer free dummy trading portfolio platform to help you step gently into stock investing with out risking your money.
Choose an Appropriate Online Broker (Offering Custodial Accounts) -- online brokers with no fees and no minimum are ideal.
Avoid Scams-- stay away from penny stocks or anyone who promises returns that are too good to be true.