Starting Early: How Teens Can Begin Investing in Stocks

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Building wealth can start at any age—whether you're in middle school, high school, college, or even afterward. The key isn’t when to start, but simply deciding to begin. If you’re reading this, you’re already taking the first step toward setting yourself up for a better financial future. Here’s how you can start investing in stocks as a teenager:

1. Learn About the Stock Market

Before you set up a custodial account with the help of your parents or guardians, it’s a good idea to learn the basics of investing. The internet makes it easy to access loads of resources—whether it’s YouTube videos, blogs, books, or online courses. There’s no single right way to learn, but it’s important to explore different sources and get a solid understanding of how the stock market works. 

For example, you can keep up with finance news on websites like MarketWatch, Investopedia, or The Motley Fool. These sources help you stay informed about which stocks are performing well and which are struggling.

2. Open a Custodial Account

To start investing, you’ll need a custodial account, which you can open with your parents or guardian. They’ll manage the account until you reach the age of 18 or 21, depending on where you live. 

It's important to talk with your parents or guardians about what you want to achieve with the account and what your strategy will be. If they already invest in the stock market, it may be easier to open an account with the brokerage they’re already using. If not, you'll need to find a brokerage that supports custodial accounts.

3. Choose the Right Brokerage

Once you and your parents or guardians are on the same page, the next step is selecting a platform to open your custodial account. 

Don’t just go with the first option—take the time to find a brokerage that offers a user-friendly website, low fees, and easy-to-understand tools. Low fees are especially important when you’re starting with smaller amounts of money. Some popular platforms for teen investors include Fidelity, Charles Schwab, Robinhood, Acorns, WeBull, and Vanguard.

4. Create Your Strategy

Now that you’ve chosen a platform and decided how much you want to invest, it’s time to think about your investment strategy. Do you plan to invest every month, or just when you have extra money? Are you interested in stocks you’re familiar with, or are you willing to take a chance on newer stocks? 

You might also consider looking into index funds or ETFs (exchange-traded funds) that offer diversification right from the start. Having a clear strategy helps you avoid making random decisions and keeps you focused on your long-term goals.

5. Start Small, Accumulate, and Diversify

As you begin investing, start small, especially if you’re just learning the ropes. You can also set up automatic contributions, so you invest regularly without thinking about it. As you gain more confidence and knowledge, start looking into diversifying your investments. This means spreading your money across different stocks or sectors—like healthcare, technology, or finance—to reduce risk. 

If one area of the market drops, others might still perform well, protecting your overall investment. To further expand your portfolio, you can also consider investing in international stocks or even the foreign exchange (Forex) market.

6. Practice with Simulators

If you’re unsure about jumping into the stock market, there are online simulators that allow you to practice risk-free. These tools let you test out trading stocks in a virtual environment, so you can get a feel for how the market works without using real money.

Some of the most popular stock simulators include:

• Investopedia Stock Simulator

• How the Market Works

• Interactive Brokers

• MarketWatch Virtual Stock Exchange

These simulators give you a chance to experiment with different investing strategies and figure out which one suits you best. You can also test your comfort level with risk, which is a key part of investing.

7. Remember the Basics

When you start investing, keep in mind that it’s a long-term game. Don’t expect quick results. Let your investments grow over time and avoid letting your emotions drive your decisions. The market may experience short-term ups and downs, but sticking with your investments for the long haul is where you’ll start to see real returns.

Only invest money that you don’t need right away and that you’re comfortable with possibly losing. Remember that how long you hold onto a stock can affect taxes and returns. If you pull out too quickly, you might miss out on potential gains.

By following these principles, you’re setting yourself up to build wealth and create a strong financial future. The earlier you start, the more time your money has to grow. Always make sure to do your research before making any decisions. While MoneyWise Teens doesn’t give specific financial advice, we’re here to help you learn smart money habits!